What does the consumption tax mean to Japanese society and U.S. society? The difference in the priorities of overall tax reforms in both countries

摘要

The Japanese tax system reflects the characteristics of postwar Japanese society. The emphasis on an equal income distribution, the concern for assets -- especially land, and the dominance of corporations as a form of business are the consistent trends. More recent trends are the realities of the aging society and the transformation from insufficient savings to excess savings. Combined with the restriction of tax implementation, these two trends were the main motives for the introduction of the current Consumption Tax and the current separated taxation on a large part of capital income in the 1987-88 reform. Based on different backgrounds, the priorities of tax reforms in Japan and in the U.S. are also different. One confusing thing from a Japanese perspective is that a consumption tax also seems to attract many U.S. economists and policymakers. Mainly surveying the arguments over the consumption tax, this paper shows what is common and what is different between the debates on overall tax reforms in the two countries. While there are many problems unique to the Japanese Consumption Tax, there may be something in the U.S. arguments over a consumption tax we Japanese should also learn from. In the U.S., the advocates of a consumption tax focus on the merits of efficiency and simplicity. In the last decade, while the need for the adjustment for inflation and the encouragement of savings might have decreased to some extent, the need to fix the distortions from sophisticated tax planning by financial innovations seems to have increased. In Japan the motives for the introduction of the Consumption Tax were rather the concern for equity -- horizontal equity, equity through the life cycle and between generations. It was thought to be a complement rather than a total substitute for the income tax. Eliminating the distortions under the conventional excise taxes and stabilizing the tax revenue were also motives.