Keidanren proposes sales tax hike to 10%, 2.5-tril. yen tax cut

TOKYO, Oct. 2 Kyodo - Japan's most influential business group proposed Thursday that the government raise the consumption tax to 10 percent from the current 5 percent while conducting a 2.5 trillion yen income tax cut as a provisional measure for five years or so.

The Japan Business Federation, widely known as Nippon Keidanren, recommended
that the increase in the consumption tax rate be implemented by fiscal 2011,
but that the 5 percent rate be maintained for a range of commodities such as
rice and wheat.
The federation's package of policy proposals also recommended that the nation's
current systems for taxation, national finances and social security be revamped
in an integrated fashion.
The package is designed to secure fiscal resources for the government-run
pension and medical insurance programs and to revive taxpayers' flagging
confidence in the nation's social security programs, the federation said.
The tax cuts should be granted to households on low to mid-level incomes of
less than 5 million yen and should be conducted in the form of annual
across-the-board reductions of 100,000 yen per household.
The federation said the application of the lower 5 percent consumption tax rate
to basic food items such as rice and wheat would help to soften the burden of
the higher 10 percent general rate.
The exemption of basic food items from the higher 10 percent rate would also
help to prevent the higher rate from having an adverse effect on personal
consumption.
The federation also recommended that the government only fund the state-run
basic pension system with tax revenues, instead of the current system under
which future beneficiaries pay premiums into the state treasury's pension
account, into which the government also channels part of its state revenues.
The federation also proposed that the government provide tax breaks for low to
mid-level income households with children starting in fiscal 2009.
It also called on the government to reduce the corporate tax rate to what it
describes as international levels in the future.
Separately, the Japan Chamber of Commerce and Industry, another influential
business lobby, proposed that the government raise the consumption tax rate
only after guiding the Japanese economy to a stable recovery.
Tadashi Okamura, chairman of the lobby, said the government ''should wait until
people's inclination to consume recovers adequately.''
==Kyodo