ID :
12149
Fri, 07/11/2008 - 11:40
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https://oananews.org//node/12149
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FOCUS: Tobacco tax hike suddenly in spotlight, but effects uncertain
TOKYO, July 11 Kyodo - As Japanese politicians facing the possibility of an imminent general election hesitate to openly advocate a sharp rise in the consumption tax, the idea ofjacking up tobacco tax has suddenly come into the spotlight as an alternative way to cover ballooning social security costs in the rapidly aging country.
After Nippon Foundation Chairman Yohei Sasakawa sparked the debate on a possible tobacco tax hike in March, proposing that cigarette prices be more than tripled from current levels to 1,000 yen per pack, about 50 lawmakersformed a cross-party group in June to study the price increase.
However, various estimates presented by economists and academics including those based on opinion polls suggest both major rises and falls in tobacco taxrevenues, casting doubt over the actual effects of a tax increase.
As a result, the lawmakers' group led by former Chief Cabinet Secretary Hidenao Nakagawa of the ruling Liberal Democratic Party and other influential politicians has recently sought to shake off the impression that it is seekinga radical tobacco tax increase.
''We'd like to tackle this issue from the viewpoint of improving the standardof people's health as well,'' Nakagawa told a group meeting.
Sasakawa, who serves as World Health Organization special ambassador for the elimination of leprosy, has presented an optimistic scenario in newspaper articles and on his blog, claiming that tobacco tax revenues could grow by 9.5 trillion yen if cigarette consumption remains unchanged in Japan despite theproposed tax hike.
Even if consumption were to fall to one-third of the current annual level of 260 billion cigarettes, tax revenues could still rise by up to 3 trillion yen -- a boon to the nation which is facing tight fiscal conditions with debts ofmore than 770 trillion yen.
Cigarettes in Japan usually sell for about 300 yen per pack of 20, of which taxaccounts for 189.17 yen, or 63.1 percent, according to Japan Tobacco Inc.
Tobacco tax revenues in fiscal 2008 through March 31 next year are projected toreach 2.20 trillion yen.
Sasakawa has called for the tobacco tax to be raised to bring Japanese cigarette price levels into line with those in the United States and Britain,where similar products sell for the equivalent of about 700 yen to 1,000 yen.
Takuro Morinaga, a JT official-turned-economist, is critical of the idea of sharply increasing tobacco tax, describing it as ''an act of violence'' against Japan's roughly 27 million smokers and the ''height of absurdity'' because hebelieves tax revenues will definitely plunge following a tax hike.
Morinaga, currently an economics professor at Dokkyo University, argues that past increases in tobacco tax of 20 yen to 30 yen per pack in fiscal 2003 and2006 did not significantly boost tax revenues.
He also believes that a sharp rise in cigarette prices to 1,000 yen per pack could prompt up to 80 percent of Japanese smokers to quit, citing a surveyconducted by Pfizer Japan Inc.
''If cigarette production in Japan shrinks by 80 percent, it could result in an 80 billion yen drop in tax revenues due to declines in corporate and income taxrevenues from the domestic tobacco industry,'' Morinaga told Kyodo News.
About 14,000 households of tobacco farmers across Japan produce cigarettesworth 1 trillion yen per year, he said.
''A cigarette tax boost will especially hurt the poor and low-income salaried workers. The lawmakers' movement can be described as anti-smoking fascism, which only allows the rich to smoke or seeks to eradicate smoking in Japan,''said Morinaga, himself a smoker.
Kyohei Morita, chief economist at Barclays Capital Japan Ltd., said that if cigarette consumption were to remain flat, a hike to 1,000 yen per pack could expand tax revenues by 8.5 trillion yen. But he said such a scenario isunlikely.
''Japanese households at present are sensitive to price hikes as wage levels are increasing slowly. A tobacco tax rise will not be an alternative to a sales tax rise, because it will not provide a stable source of tax revenue,'' Moritasaid.
He also pointed out that a sharp rise in tobacco tax could dampen spending onother items with consumers tightening their purse strings.
Moreover, if cigarette consumption plummets and the domestic tobacco industry is devastated, the government will see a steep decline in dividend income from its shares in JT, Morita added. ''There are many hurdles to overcome to achievea 1,000 yen cigarette pack,'' he said.
The government holds a 50 percent stake in JT, which was privatized in 1985.
The company is the world's third largest tobacco manufacturer and the onlydomestic producer in Japan with a domestic market share of about 65 percent.
The Finance Ministry is watching the debate closely as it is impossible at present to correctly estimate possible tax revenue gains or losses, a ministryofficial said.
The lawmakers' group is scheduled to compile an interim report by the time the government and political parties launch full-fledged discussions oncomprehensive tax reform in the fall.
Yoko Komiyama of the main opposition Democratic Party of Japan, who is one of seven joint representatives of the parliamentarians' league, has suggested that a bill for the tobacco tax hike could be submitted to the Diet by a cross-partygroup of lawmakers later this year.
==Kyodo
After Nippon Foundation Chairman Yohei Sasakawa sparked the debate on a possible tobacco tax hike in March, proposing that cigarette prices be more than tripled from current levels to 1,000 yen per pack, about 50 lawmakersformed a cross-party group in June to study the price increase.
However, various estimates presented by economists and academics including those based on opinion polls suggest both major rises and falls in tobacco taxrevenues, casting doubt over the actual effects of a tax increase.
As a result, the lawmakers' group led by former Chief Cabinet Secretary Hidenao Nakagawa of the ruling Liberal Democratic Party and other influential politicians has recently sought to shake off the impression that it is seekinga radical tobacco tax increase.
''We'd like to tackle this issue from the viewpoint of improving the standardof people's health as well,'' Nakagawa told a group meeting.
Sasakawa, who serves as World Health Organization special ambassador for the elimination of leprosy, has presented an optimistic scenario in newspaper articles and on his blog, claiming that tobacco tax revenues could grow by 9.5 trillion yen if cigarette consumption remains unchanged in Japan despite theproposed tax hike.
Even if consumption were to fall to one-third of the current annual level of 260 billion cigarettes, tax revenues could still rise by up to 3 trillion yen -- a boon to the nation which is facing tight fiscal conditions with debts ofmore than 770 trillion yen.
Cigarettes in Japan usually sell for about 300 yen per pack of 20, of which taxaccounts for 189.17 yen, or 63.1 percent, according to Japan Tobacco Inc.
Tobacco tax revenues in fiscal 2008 through March 31 next year are projected toreach 2.20 trillion yen.
Sasakawa has called for the tobacco tax to be raised to bring Japanese cigarette price levels into line with those in the United States and Britain,where similar products sell for the equivalent of about 700 yen to 1,000 yen.
Takuro Morinaga, a JT official-turned-economist, is critical of the idea of sharply increasing tobacco tax, describing it as ''an act of violence'' against Japan's roughly 27 million smokers and the ''height of absurdity'' because hebelieves tax revenues will definitely plunge following a tax hike.
Morinaga, currently an economics professor at Dokkyo University, argues that past increases in tobacco tax of 20 yen to 30 yen per pack in fiscal 2003 and2006 did not significantly boost tax revenues.
He also believes that a sharp rise in cigarette prices to 1,000 yen per pack could prompt up to 80 percent of Japanese smokers to quit, citing a surveyconducted by Pfizer Japan Inc.
''If cigarette production in Japan shrinks by 80 percent, it could result in an 80 billion yen drop in tax revenues due to declines in corporate and income taxrevenues from the domestic tobacco industry,'' Morinaga told Kyodo News.
About 14,000 households of tobacco farmers across Japan produce cigarettesworth 1 trillion yen per year, he said.
''A cigarette tax boost will especially hurt the poor and low-income salaried workers. The lawmakers' movement can be described as anti-smoking fascism, which only allows the rich to smoke or seeks to eradicate smoking in Japan,''said Morinaga, himself a smoker.
Kyohei Morita, chief economist at Barclays Capital Japan Ltd., said that if cigarette consumption were to remain flat, a hike to 1,000 yen per pack could expand tax revenues by 8.5 trillion yen. But he said such a scenario isunlikely.
''Japanese households at present are sensitive to price hikes as wage levels are increasing slowly. A tobacco tax rise will not be an alternative to a sales tax rise, because it will not provide a stable source of tax revenue,'' Moritasaid.
He also pointed out that a sharp rise in tobacco tax could dampen spending onother items with consumers tightening their purse strings.
Moreover, if cigarette consumption plummets and the domestic tobacco industry is devastated, the government will see a steep decline in dividend income from its shares in JT, Morita added. ''There are many hurdles to overcome to achievea 1,000 yen cigarette pack,'' he said.
The government holds a 50 percent stake in JT, which was privatized in 1985.
The company is the world's third largest tobacco manufacturer and the onlydomestic producer in Japan with a domestic market share of about 65 percent.
The Finance Ministry is watching the debate closely as it is impossible at present to correctly estimate possible tax revenue gains or losses, a ministryofficial said.
The lawmakers' group is scheduled to compile an interim report by the time the government and political parties launch full-fledged discussions oncomprehensive tax reform in the fall.
Yoko Komiyama of the main opposition Democratic Party of Japan, who is one of seven joint representatives of the parliamentarians' league, has suggested that a bill for the tobacco tax hike could be submitted to the Diet by a cross-partygroup of lawmakers later this year.
==Kyodo
