A panel of the People's Conference on Social Security, a forum established by Prime Minister Yasuo Fukuda, has made public its calculation of how much the consumption tax should rise if the tax revenue is used to pay for the basic portion of pensions in full.
If a uniform ¥66,000, the current level of the basic portion, is paid monthly to pensioners — including those who have failed to pay pension premiums — the tax rate would have to rise from the current 5 percent to 11 percent in fiscal 2009 and to 13 percent in fiscal 2050. If benefits for those who have failed to pay premiums are to be reduced, the projected tax rate is 9.5 percent in fiscal 2009 and 12 percent in fiscal 2050. If benefits for those who have paid premiums are to be added to the uniform ¥66,000, a maximum 18 percent rate would be needed in fiscal 2009.
The government already has a plan to start using tax money to cover half of the basic portion of pensions in fiscal 2009, raising the ratio from the current one-third. To cover the cost, ¥2.3 trillion will be needed annually. The panel assumes that the consumption tax rate will be increased to 6 percent in fiscal 2009 to secure the ¥2.3 trillion.