No matter how urgent and important some issues — such as the low birth rate — may be, the cost of responding to them must not be passed down to future generations. The government should not shirk discussions on the appropriate tax burden.

The government’s Tax Commission has submitted to Prime Minister Fumio Kishida a report on proposals for medium- and long-term taxation systems. The panel submitted such a report for the first time in four years, since 2019.

The tax panels of the ruling bloc — the Liberal Democratic Party and Komeito — decide specific items for annual tax reform. Meanwhile, the government’s Tax Commission, an advisory body to the prime minister, consists of university professors and experts, among other figures, and is tasked with making proposals for a desirable future tax system.

It can be said that this panel’s original role is to take up discussions that could lead to an increase in tax burdens on the public, a topic that politicians tend to avoid.

The panel’s report recognizes “the need to share burdens widely according to the ability [to pay],” in light of the aging population and low birth rate. The report stressed concerns that the situation of putting off the tax burdens by issuing government bonds will create a sense of inequity among generations.

In the government’s general account, tax revenues have continued to fall far short of expenditures. For fiscal 2022, which ended in March, national tax revenue is expected to hit a record high level in the ¥71 trillion range owing to a recovery in corporate earnings and rising prices. However, tax revenue has not kept pace with the current budget scale, which has now exceeded ¥100 trillion.

Given that, the report specified the importance of “tax sufficiency,” pointing to the need to secure sufficient tax revenues to cover government spending.

Kishida has said he regards measures to combat the low birth rate as “the most effective investment in the future,” and expressed the intention to apply a budget in the mid ¥3 trillion range. However, he has stopped short of mentioning specific funding sources, even while saying that there will be no tax increases.

The panel’s report appears to raise questions over such a stance. It is hoped that Kishida will take this seriously.

On the other hand, it is hard to say that the report itself has sufficiently specific proposals for the future tax system that should be in place.

Japan’s elderly population is expected to peak at more than 39 million around 2040, and social security costs, such as medical care and pensions, are highly likely to grow along the way.

It is widely believed that a consumption tax hike will be inevitable to cover these costs. Some people argue that revenue from the consumption tax, which is shouldered broadly and equitably by the people, is also suitable as a source to fund measures to cope with the low birth rate.

However, the report only stated that revenue from the consumption tax will continue to be “important” to help pay social security benefits and did not mention raising the tax rate.

The prime minister has stated that he will not consider consumption tax hikes for about the next 10 years. However, Japan’s fiscal deterioration is serious, so there is no time to spare. It is hoped that the government’s tax panel will present a clear future vision for the consumption tax.

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