TAX NEWS - June 2010

Japan Tax: DPJ revises manifesto, aims for consumption tax hike after summer election

The Democratic Party of Japan (DPJ) has pledged to push forward discussions on a consumption tax hike in its campaign manifesto for this summer's House of Councillors election.

In its latest manifesto, the DPJ will include a consumption tax increase, stating, "In order to reach an early conclusion, we will promote a cross-party discussion on fundamental reform of the tax system including the consumption tax."

In its draft manifesto, the DPJ had stated it would start talks on taxation reform "after the next House of Representatives election." However, the proposed timeline has been revised to accelerate the discussion, with Prime Minister Naoto Kan insisting on an early agreement on the matter and stressing his intention to begin cross-party discussions after the Upper House election.

The DPJ has set out a three-stage approach to reforming the nation's finances and listed the all-party talks on tax reform as a goal to be implemented "immediately." The revised campaign promise will allow the government to increase the consumption tax before the next House of Representatives election, if both ruling and opposition parties reach an early agreement on the new tax system.

Meanwhile, touching on the issuance of new government bonds for fiscal 2011, the DPJ manifesto states that it will "strive to hold the amount under the fiscal 2010 level." The party has also vowed to at least halve Japan's primary balance deficit from the 2010 level by fiscal 2015, and achieve a surplus by fiscal 2020.

In relation to the relocation issue of the U.S. Marine Corps' Air Station Futenma in Okinawa Prefecture, the DPJ has pledged to "do its utmost to lessen the burden on Okinawan people in line with the Japan-U.S. agreement." It also states that child allowances will only be provided to children living in Japan from fiscal 2011.