Takaichi Voices Intent to Dispel Concerns on Tax Rate Cut’s Fiscal Impact in Yomiuri Shimbun Interview
Getting the green light for the plan to cut the consumption tax rate on food items was difficult enough. But now Prime Minister Sanae Takaichi is gearing up to tackle an equally challenging task: dispelling concerns about how the resulting shortfall in tax revenue will be covered.
In an interview with The Yomiuri Shimbun, Prime Minister Sanae Takaichi expressed her determination to address concerns regarding the fiscal impact of reducing the consumption tax rate on food items. The primary challenge lies in the fact that lowering the rate from 8% to 1% would result in an annual tax revenue shortfall of approximately ¥5 trillion. Takaichi plans to explain measures for securing the necessary fiscal resources, emphasizing her commitment to avoiding deficit-financing through government bonds.
To counter the revenue shortfall, Takaichi proposed reforming the budget compilation process, aiming to break the reliance on supplementary budgets starting from the next fiscal year. These supplementary budgets, which accounted for about ¥3 trillion annually, have been used to address rising prices. Additionally, she suggested exploring the foreign exchange fund special account as an additional revenue source.
Takaichi assured that lowering the consumption tax rate will not adversely affect social security policies, including pensions and medical care. She emphasized her commitment to ensuring the sustainability of these funding sources by fostering economic growth. Despite concerns about the political difficulty of raising the consumption tax rate by 7 percentage points, Takaichi remains confident that public support can be garnered through the implementation of the income-linked benefit system for low and middle-income earners, set to take effect in fiscal 2029.
The prime minister also revealed her intention to present bills related to the benefits and tax cut as a single piece of legislation to facilitate a smooth transition. She acknowledged that her decision to reduce the consumption tax rate was driven by the desire to ease the burden on ordinary citizens and fulfill a pledge made by the Liberal Democratic Party in the recent House of Representatives election.
Takaichi views the lower consumption tax on food items as a matter of national dignity, with the goal of ensuring that people do not have to worry about food prices.
Written by urgent.news from The Japan News by The Yomiuri Shimbun's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
