Keiichi Ishii on Consumption Tax Increase

April 27, 2012

In a new series featured in the daily Komei Shimbun organ newspaper, senior New Komeito officials provide perspectives and positions on key policy issues. For the second installment, Policy Research Council Chair Keiich Ishii addresses Prime Minister Yoshihiko Noda's effort to double the consumption tax rate from 5% to 10% by 2015.

In his interview, Ishii said New Komeito intends to expose the flaws inherent to the proposed tax hike and seek clarification on DPJ's position on reforming the social security and tax systems under one comprehensive initiative. While New Komeito believes the consumption tax will need to be raised as part of a major overhaul of the tax system, Ishii stated that the DPJ's proposed increase is riddled with too many flaws and ambiguities to endorse.

Among the points that the DPJ must clarify are the specifics of its proposed minimum pension plan for low-income subscribers, and provide a concrete vision of how it intends to reform the existing social security system. Ishii was also critical of the DPJ plan to raise the income tax despite the paltry increase in revenues it is expected to generate, and that a consumption tax hike will strike low-income citizens the hardest.

For New Komeito to back a tax hike, Ishii stipulated the following five conditions: 1) That the DPJ lays out a comprehensive design of a new social security system; 2) that the economy show tangible evidence of recovering; 3) that government administration undergo sweeping reforms; 4) that revenues raised from the consumption tax be used exclusively to subsidize social security outlays; and 5) that the social security system be funded by the tax system as a whole.