The strengthening yen was a factor, making local products less attractive to foreign buyers, but investors were also riled after a parliamentary select committee approved a bill to double consumption tax by 2015.
From 2003 to 2007, the primary balance deficit was reduced from JPY 28 trillion to JPY 6 trillion, a reduction of JPY 22 trillion, equivalent to increasing the consumption tax by 9 percentage points.
And it surely is not the cosmic shift to a consumption tax favored by others.
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This is happening at the same time that some red states notably Kansas and Louisiana are looking at lowering income tax rates by shifting to rely more on consumption or sales tax revenues.
As with Obamanomics, the unspoken understanding, or desire, of the technocrats is to fund additional incentives, as well as to pay for the welfare state, by raising the consumption tax (national sales tax) from the current 5 percent to something much higher.
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So, it seems, Mr Bush is trying to reach the goal of a consumption tax not through fundamental tax reform, but simply by a thousand cuts on the taxes on capital.
To fund this growth, there is already a government-DPJ decision to increase the consumption tax to 10 percent by the middle of the decade.
Researchers estimate that in China, where smoking rates are rising quickly, a 10% increase in cigarette tax would cut consumption by 5% and increase revenues by 5%, enough to finance essential health care for a third of China's poorest 100m people.
And then much like the flat tax, a consumption tax could easily be perverted by future Congresses eager to raise it in return for some favor handed out to a narrow part of the electorate.
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In the case of North Carolina, a new study by the Civitas Institute concludes that a tax reform that shifts more of the burden to consumption from income would increase average annual personal income growth by 0.38% to 0.66%.
Before increasing the consumption tax, government personnel expense should be cut by 20 percent.
The committee responsible has come up with a proposal to increase the consumption (VAT) tax from 5 to 10 percent by 2015.
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Relations with major financial institutions such as the International Monetary Fund have improved, particularly in the light of more effective revenue collection -- up by about a half following the introduction of a consumption tax last year.
Among them: enactment of a national speed limit of 65 miles per hour, freight industry participation in an Environmental Protection Agency program to reduce fuel consumption, and a reduction of highway congestion by raising the fuel tax if necessary.
Of course I am referring to the bill to raise the consumption tax from the current 5% to 10% by October 2015 which was passed in the lower Diet chamber on June 26 and the upper chamber on August 10.
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Noda has also signaled that he will honor the previously-reached agreement with the opposition parties on restructuring government finances and putting welfare state programs on a sustainable financing footing, specifically raising the consumption tax from the current five percent to 10 percent by yearend 2015.
As for a rise in the consumption tax, an opinion survey conducted at the polling stations by Asahi Shimbun, a newspaper, found that more voters favoured a doubling in the tax, to 10%, than were against it.
The significantly higher tax base that would result under lower capital income taxes means that such a reform would be deficit-neutral, provided that either transfer payments were reduced by less than 2% of GDP or a national consumption tax of less than 3% were adopted.
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It is to raise the consumption (VAT) tax from the current 5 percent to 10 percent by 2015.
Lastly, loose talk by the ruling Liberal Democratic Party about doubling the consumption (sales) tax, to 10%, has not helped fragile sentiment, however necessary it may eventually be to pay for Japan's pensions burden.
John L. Mikesell, an Indiana University public finance professor, says that since the sales tax is meant to tax personal consumption, it should be imposed on services bought by consumers and not on those purchased by businesses.
The president should learn from China to shift some of the tax burden from lower income classes to wealthier people by increasing taxes on consumption rather than, as he has tried to do, on income.
By raising consumption taxes on products and services targeting the affluent while reducing or maintaining income tax levels, the Chinese government has been able to sustain consumer confidence, increase spending (retail sales have risen 16-18% annually over the last three years), and get needed tax revenue for infrastructure projects required to maintain employment numbers.
Previous price rises, caused by weaker sterling and an increase in value-added tax, continue to chill consumption.
Quite unlike taxes on income that are paid no matter what, with a consumption tax individuals would be able to limit the amount of money handed to the government by virtue of spending less.
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