LDP Divided over Proposed Consumption Tax Cut

Tokyo, July 31 (Jiji Press)–Japan’s ruling Liberal Democratic Party is divided over Prime Minister Sanae Takaichi’s proposal to cut the consumption tax rate for food from 8 pct to 1 pct for two years starting in April 2027 as a measure against inflation. The LDP held a joint meeting of its research commissions on the tax and social security systems on Friday to discuss the proposal. While some supported the tax cut, others raised opposition due to concerns about its adverse impact on public finances. Takaichi has said she wants the government and the ruling coalition to decide their policy on the matter in early August. LDP executives hope to reach a conclusion in the first half of next week. At the joint meeting, proponents argued that a consumption tax cut was included in the LDP’s campaign pledges for the February election for the House of Representatives, the lower chamber of Japan’s parliament, and that people are calling for a tax reduction. Among opponents, some cited a lack of financial resources, and others questioned whether a consumption tax cut would lead to lower prices. Before the joint meeting, senior members of the Research Commission on the Tax System held talks. Itsunori Onodera, head of the panel, told reporters that many expressed opposition to the proposed tax reduction. “Lowering and raising the consumption tax rate will cause confusion in society,” Shoji Nishida, a lawmaker of the House of Councillors, the upper parliamentary chamber, said. Takaichi plans to raise the tax rate back to 8 pct after two years. Former LDP policy chief Tomomi Inada and former Justice Minister Yoshihisa Furukawa called for cash benefits rather than the consumption tax cut. At an extraordinary meeting of LDP executives Thursday, Takaichi, also president of the party, announced the consumption tax cut policy and a plan to provide cash benefits to middle- and low-income earners in order to effectively reduce the tax rate on food items to zero. END [Copyright The Jiji Press, Ltd.]