At the first meeting (Feb. 24) of the government Tax Commission's expert panel to discuss tax reform, Finance Minister Naoto Kan called for a review of how the tax system has evolved since the 1980s. Apparently Mr. Kan thinks that past changes to the tax system have weakened the state's ability to collect and redistribute funds, leading to a widening economic gap between rich and poor.
In fiscal 2010, tax revenue will amount to some ¥37 trillion, covering only about 40 percent of the government's budget. Bonds worth ¥44 trillion — a record-high amount — have to be issued. It is inevitable that the government will consider raising some taxes, but so far discussion has inclined too far toward the inequitable measure of raising the consumption tax.
A one-percentage point rise in the consumption tax rate would bring in an extra ¥2.5 trillion a year, but it would weigh more heavily on people with low incomes. There must be a more equitable way to secure sufficient revenue. If it is determined to raise the consumption tax rate, the panel should look into lowering or maintaining the rate for groceries and other daily necessities.