Tokyo: A Japanese government panel recommended that Prime Minister Naoto Kan temporarily raise taxes to pay for rebuilding from the March earthquake and tsunami and avoid adding to the world's largest debt.
"We must share the fin-ancial burden instead of passing it on to the next generation," Kan's reconstruction panel said in its first official report. "Along with spending cuts, the government should speedily examine key taxes for a temporary tax increase to meet rising recovery demand."
Panel chair Makoto Iokibe, who presented the report to Kan in Tokyo, on June 11 defined ‘key taxes' as including those on income, consumption and corporate profits. The recommendations come as Kan's top economic advisers intensify their calls to double the country's five per cent sales tax.
Those aspirations may be difficult to realise given rising pressure on Kan to fulfill his pledge to resign. He is seeking to pass a second post-earthquake stimulus package as well as legislation authorising deficit bond sales during a Diet session that was extended until the end of August.
"We really don't know how the recommendations will be treated considering the political chaos," said Hiroshi Shiraishi, an economist at BNP Paribas in Tokyo. "Unfortunately, the debate on reconstruction and tax changes has been part of the political game."
Response to disaster
Senior members of Kan's Democratic Party of Japan, including Azuma Koshiishi, head of the party's upper house caucus, met yesterday and agreed Kan should step down before the current parliamentary session ends on August 31, Jiji Press reported last night, citing party officials it didn't name.
Kan established the 15-member panel in response to the March 11 disaster that left nearly 23,000 people dead or missing and crippled the Fukushima Dai-Ichi nuclear power plant. The government yesterday estimated the damage to buildings, roads and infrastructure at 16.9 trillion yen (Dh767.6 trillion). Losses caused by radiation leaks weren't included.
The conflict over when Kan will quit is complicating his efforts to push through legislation, including authorising 44.3 trillion yen in government bonds needed for this year's record budget.
