At a meeting of the special committee on the comprehensive reform of social security and taxation system on May 17, Acting Secretary General Shinji Tarutoko asked Prime Minister Noda and relevant Ministers their perspectives on issues such as: 1) the current condition of the social security fund covered by tax revenue; 2) compensation for employee pension and mutual pension funds by tax revenue; and 3) the necessity of a special-purpose tax for social security.
Tarutoko pointed out that a lack of information among the Japanese public about the necessity for tax increases given the aging of society and falling birthrate was a possible factor preventing the public from supporting the comprehensive reform. He reported that he had felt this through nationwide activities related to the “Responsibility for Tomorrow” dialogue meetings, noting that although those meetings partially contributed to the enhancement of the public’s understanding, the people of Japan seemed still just slightly aware of the nature of the issue. Tarutoko emphasized that in order to promote further understanding, it was important to convey that consumption tax would be dealt with as a special-purpose tax with revenue going toward four social security funds (pension, medical care, nursing care, and children and childcare support). He proposed that calling consumption tax “pension and medical care tax” would make it easier to explain the reform of the taxation system.
Referring to tax revenues earmarked for road construction, Tarutoko expressed his view that special-purpose tax should be injected into the most substantial measures of the era – especially those requiring large amounts of money. He asked Minister of Finance Jun Azumi’s perspectives, stating, “The entire nation is engaged in pension, medical care, nursing care, and children and childcare support. The consumption tax is appropriate as a special-purpose tax for social security as each member of the public should share in bearing a small amount of such expenditures.”
In response, Azumi mentioned the special reconstruction income tax, which would be appropriated to finance reconstruction and be imposed as a temporary surtax with a constant rate on income tax for 25 years. He said, “A part of income surtax goes to reconstruction funds. I assume that Japanese citizens picture a connection between surtax and reconstruction. ” He also spoke about his vision regarding consumption tax and the necessity of efforts to enhance understanding toward the tax increase, stating “It is not that the Ministry of Finance uses the money of the taxpayers for its own purpose. The taxpayer’s money is directly used for pension, medical care, nursing care, and countermeasures to the falling birthrate. We have to publicize the concept of this system among the public, and help them to understand that every time they pay consumption tax ‘this tax is helping with grandma’s pension or medical care.’”
At the end of the question period, Tarutoko referred to the difference of balances among the social security responsibilities and benefits of each generation. Those who were born in the late 1950s to early 1960s, including Azumi and Prime Minister Noda, were set to stay at a break-even point – in other words, they would receive almost the same amount of social security benefit as they had paid. Those in more senior generations received more, while the younger generation received less than the total amount of their payment. Tarutoko stated, “We are responsible for securing a national system by balancing the gap among generations.” He asked for Noda’s vision on these issues.
Noda positioned “fairness” as a keyword for the comprehensive reform, strongly expressing his decision to take up the responsibility to ensure intergenerational and intra-generational fairness related to the reciprocal balance of social security.