Tax commission leaning to raise 12 trillion yen through tax hikes

TOKYO, Sept. 15 Kyodo -
The government's tax commission made final arrangements Thursday to propose a plan to raise around 12 trillion yen through tax hikes to finance reconstruction work from the March 11 earthquake and tsunami, sources close to the matter said.
The commission plans to put forward three tax hike options, two of which include increases in individual and corporate income taxes while one option would raise the entire sum by increasing the consumption tax. The tax hike is to be implemented for up to 10 years from fiscal 2012.
The commission will finalize details of the three options on Friday, and the ruling and opposition parties are expected to start holding discussions on the matter by the end of this month.
Under the most likely scenario, individual income tax is expected to be raised for five to 10 years and corporate income tax for three years, in addition to a hike in a local government tax.
Another option is raising individual income, corporate income and tobacco taxes, while the third option is raising the consumption tax rate.
As for the individual income tax, the commission is eyeing either setting a 10-percent surtax for a five-year period, or a 5-percent surtax for a 10-year period.
But the figures may change if the government is able to reduce the amount of tax increases through cuts in expenditures and usage of nontax revenues.
Adjustments over the matter will not be easy because some members of the ruling Democratic Party of Japan are reluctant to raise taxes as it could negatively impact the economy, which is now recovering from the March disasters.
A senior Finance Ministry official told a briefing later in the day that the talks over nontax revenues ''have not yet been settled'' and that another meeting of a work team will be held Friday.
If discussions are wrapped up, the commission would report the content to the government's headquarters discussing reconstruction measures, he said.