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2012/03/15
DPJ holds forum to explain integrated social security and tax reform to local administrators


On March 15, the DPJ held a “Local Government Forum” to which they invited officials and others from local governments around the nation.

At the Forum, the Chair of the DPJ Tax System Research Committee, Supreme Adviser Hirohisa Fujii explained the history behind the integrated social security and tax reforms currently being pursued. He said that during the era of the Ikeda Cabinet, which initiated the so-called “Income Doubling Plan”, there had been a growing feeling within society that while Japan’s GNP had surpassed that of European nations, “the happiness of each individual was more important than GNP”, and that during the subsequent Cabinets of Eisaku Sato and Kakuei Tanaka, in which Fujii himself had served as secretary to the Chief Cabinet Secretary, a quite substantial social security system had been established, which included a “child allowance”, “making medical care for the elderly free” and “reducing the burden of medical insurance borne by families from 50% to 30%”. He said that the social security system differed from public investment, in than once initiated it should be continued regardless of the economic conditions at any particular time, and explained that in consideration of the two points of stability of tax revenue and fairness in distributing the burden across society, consumption tax had been considered to be the most appropriate source of revenue. Fujii also looked back over past history, pointing out that consumption tax had previously been used to cover shortfalls in general account funding, and emphasized that under the current reform, the plan was to turn consumption tax into a tax whose revenues would be entirely devoted to the four areas of social security funding (pensions, medical care, nursing care and child-raising support). At the same time, he expressed his resolve to engage in thorough-going political reform, including reducing the number of Diet members and reducing Diet members’ allowances, prior to implementing consumption tax increases. Finally, Fujii stressed that the legacy the party wanted to leave to future generations was peace and a stable social security system, and said, “Neither the enhancement of social security nor economic growth can be achieved without peace. Unless we stabilize the lives of the nation, we cannot achieve peace within Japan.”

Former Minister of International Affairs and Communications Yoshihiro Katayama then made a keynote speech regarding the relationship between tax reform and the regions. Following this, Vice Chair of the DPJ Policy Research Committee Junya Ogawa once more emphasized that the need to reform the social security system in order to respond to social and economic changes such as changes in the employment base typified by the increase in the number of irregular worker, the aging of the population, the decrease in the working population, the rapid increase in social security costs stemming from the aging society, and changes in family structure and local communities. He said that reforms of the social security system would strengthen its functions, and introduced proposed increases in basic pensions for those on low incomes, the reduction of the qualifying period necessary to receive a pension, and expanding the enrolment of part-time workers in the employee’s pension system and the employee’s health insurance system as examples of this. Ogawa also explained that as tax system reforms to ensure the provision of stable sources of revenue for social security, consumption tax would be increased, the rate of income tax for taxable incomes over 50 million yen would be raised, the basic exemption threshold for inheritance tax would be reduced, and the highest rate of inheritance tax would be raised. With regard in particular to consumption tax, he said that in view of problems with the potential regressive nature of such increases, a social security/tax number system would be considered, and this issue dealt with through refundable tax credits, and that 1.54% of the proposed 5% increase in the tax would be allotted to local taxes.

With regard to political and administrative reform, Ogawa emphasized the party’s intention to engage in reductions in the number of Diet members and in allowances and special privileges provided for Diet members, as well as explaining the current state of play of discussions on these matters. He added that a general election would definitely take place before the consumption tax was raised to 8% in April of 2014 and to 10% in October of 2015 as is proposed, and would be implemented under a new administration that had received approval at the ballot box, and that such implementation would include economic provisions.

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