Repeating Mistakes - Japan Taxes

Taxes in Japan are actually quite straightforward. The overall tax burden is about the same as the US, although perhaps slightly more progressive (i.e. higher for higher incomes, lower for lower incomes) but not dramatically so. Best of all, the system is very simple. If you are employed and make less than JPY 20,000,000 a year, your employer takes care of it for you. If you make more than that, or have other income, etc. you simply file a 2 page form with the national tax office. All other income taxes, including local taxes, social insurances, and the like, all flow from that same income calculation. On top of this there is a nationwide 5% sales tax.

But here's the problem: Japan is looking to raise taxes just at a time when the economy remains fragile due to global pressures. There are serious discussions about raising the consumption tax from 5% to 7% or more. In the early nineties the tax increased from 3% to 5% and essentially killed off a nascent economic recovery. If consumption tax increases again, I predict the same thing will happen again.

The quirkiest tax is the gasoline tax. This was doubled in the 1970s as a 'temporary measure' for road building. What followed was a massive political patronage system around road construction that has lastet a generation. It would seem to me now that there are no roads left to build! However, the LDP preserves its power in part because of pork-barrel largesse to key constituencies. The DPJ, which now controls the upper house of parliament, naturally wants this temporary tax repealed. But this is not for any particular economic reason. Rather, they know that it would take away part of the LDP's power.

Who says Japanese politics is boring?!?