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Taxes may be increased in Japan

30 March 2011 08:30 (UTC +04:00)

Baku - APA-Economics. Japan has not ruled out any source of funding for reconstruction after the devastating earthquake and tsunami, including a tax increase or dropping a planned corporate tax cut, Prime Minister Naoto Kan said on Tuesday, Reuters reported.

The premier is eyeing spending of 2 trillion to 3 trillion yen ($24.5-$36.7 billion) in the first of several emergency budgets to cope with the damage from the quake, Kyodo news agency reported on Tuesday, although the finance minister said the size of the extra budget has not been decided yet.

Kan’s government, still juggling delivering aid to the worst-hit areas with a protracted battle to contain the world’s worst nuclear crisis in 25 years, must also decide how to pay for Japan’s biggest rebuilding effort since post-World War Two.

An opinion poll published on Sunday showed more than two-thirds of the Japanese public would support an extra tax to fund that effort.

Kan told parliament he was not considering a tax rise at the moment but he signaled that it was among options the government would consider.

"We need to pursue various possibilities," Kan said, when asked about a possible tax increase.

Government officials have also indicated they may scrap a plan to cut the corporate tax rate by 5 percentage points from around 40 percent now as it reviews policy priorities in the wake of the March 11 quake.

"That is among the many options we will consider," Kan said.

Cutting the corporate tax rate, estimated to reduce revenues by some 430 billion yen ($5.3 billion), has been seen as a step to make Japanese firms more competitive, as well as an important pro-business gesture by the Democratic Party.

Japan’s top business lobby this week gave the government the green light to drop the plan.

The government estimated last week the damage to roads, homes, factories and other infrastructure from the magnitude 9.0 quake and deadly tsunami could top $300 billion, making it the world’s costliest natural disaster.

Economists polled by Reuters last week forecast the government could end up spending as much as $250 billion in additional emergency budgets, with a first fiscal package seen at around $60 billion.

Japan’s parliament on Tuesday passed the regular $1.1 trillion budget for the year from April 1, but it still needs to pass a bill needed to issue bonds to fund some of the spending, both in the regular and extra budgets.

Kan told lawmakers he hoped to submit an emergency budget to parliament in time for debate to kick off next month.