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POLITICS

Gov’t panel starts discussions on usage of increased tax revenue

  • 2016-01-22 15:00:00
  • , Nikkei
  • Translation

(Nikkei: January 22, 2016 – p. 5)

 

 The government’s Council on Economic and Fiscal Policy (chaired by Prime Minister Shinzo Abe) on Jan. 21 began discussions on how to use increased tax revenue as a result of economic recovery. Abe instructed that clear-cut guidelines on the usage should be laid out in a basic policy blueprint for economic and fiscal management, which will be compiled in June. He wants to tap into increased tax revenue to implement policies related to his initiative of creating a society where all citizens are dynamically engaged. But concerns are mounting that tax revenue may decline due to market turmoil. The government may have to consider market and economic circumstances as it proceeds with the discussions.

 

 Tax revenue paid into the state and local coffers has grown by 21 trillion yen since the Abe government was formed. Excluding a revenue increase of 6.3 trillion yen resulting from the sales tax hike to 8% in 2014, taxes paid into the state coffers grow 8 trillion yen a year.

 

 Abe is looking to include in an initial budget for fiscal 2017 new policies financed by this tax revenue rise. But the Ministry of Finance maintains the position that increased tax revenue should be used to curb issuances of government bonds due to dire fiscal straits.

 

 Discussions will focus on how to create a mechanism to utilize increased tax revenue. A fiscal integrity plan, which the government laid out last year, calls for not allowing general spending to exceed 1.6 trillion yen over the next three years. The key point will be how to create a mechanism while sticking to the 1.6 trillion yen threshold. At this stage, one of the ideas being considered is to finance policies aimed at realizing the creation of creation of a society where all citizens are dynamically engaged from a different source.

 

 The usage of increased tax revenue will also become another focus of discussion. Since Abe already mentioned it at the Jan. 21 meeting, priority will likely be given to financing policies aimed at realizing the creation of creation of a society where all citizens are dynamically engaged. But he has also expressed interest in using the money to finance a reduced tax rate system.

 

 With the yen regaining strength and stock prices heading south, discussions on increased tax revenue may fade away down the road. “If tax revenue shrinks, the foundation of discussions may collapse,” said a senior official with the Cabinet Office. (Abridged)

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