firstly,
What is Consumption Tax?
- Investopedia.com : tax on
the purchase of a good or service. Consumption taxes can take the form of sales
taxes, tariffs, excise and other taxes on consumed goods and services.
- Wikipedia : a tax on spending on goods and services. The tax base of such a tax is the money
spent on consumption. Consumption taxes are usually indirect, such as a sales tax or value added tax.
Comption Tax is included Value-added tax, Sales tax, Excise tax, Expenditure tax (see the details at http://en.wikipedia.org/wiki/Consumption_tax.
Japan Consumption Tax History
The Liberal Democratic
Party government
of Masayoshi Ohira had attempted to introduce a consumption tax in 1979. Ohira met a lot of opposition within his own party and gave up on his attempt
after his party suffered badly in the 1979 election.
Ten years later Noboru Takeshita successfully negotiated with politicians, bureaucrats, business
and labor unions to introduce a consumption tax, which was introduced at a rate of 3% consumption tax in 1989.
In April 1997 under
the government of Ryutaro Hashimoto it was increased to 5%. The 5% is made up of a 4%
national consumption tax and a 1% local consumption tax. Shortly after the
tax was introduced Japan fell into recession, which was blamed by some
on the consumption tax increase, and by others on the 1997 Asian financial crisis.
Prime Minister Junichiro Koizumi said
he had no intention of raising the tax during his government, but after his
massive victory in the 2005 election he lifted a ban on discussing it. 15 Over
the following years a number of LDP politicians discussed
raising it further, including prime ministers Shinzo Abe, 16 Yasuo Fukuda, and Taro Aso.
The Democratic Party of Japan came to power in the August 2009 elections with a promise not to raise the consumption tax for four years. 19 The
first DPJ prime minister, Yukio Hatoyama was
opposed, but Naoto Kan replaced him and called
for the consumption tax to be raised.
The following prime
minister, Yoshihiko Noda "staked his political life" on raising the tax. Despite
an internal battle that saw former DPJ leader and co-founder Ichiro Ozawa and
many other DPJ diet members vote against the bill and then leave the party; on June 26, 2012,
the lower house of the Japanese diet passed a bill to double the tax to 10%.
Despite
considerable opposition and an attempted no-confidence motion from
minor opposition parties the bill was successfully passed through the upper house on August 10 2012,
so the tax was increased to 8% by April 2014 and will be increased to 10% by October 2015.
NOW
Japan has raised its consumption tax -the
equivalent of VAT (value-added tax) or sales tax- for the first time in 17 years in an attempt to rein in public debt. From
Tuesday, sales tax will increase from 5% to 8%. It will rise again, to 10%, in
October 2015.
Prime Minister
Shinzo Abe said he would continue to take "necessary action" to
address livelihood issues and keep Japan's economy on track. The stepped tax increases are aimed
at covering rising social welfare costs linked to Japan's ageing population. Japan currently has one of the lowest
birth rates in the world. It also has the world's highest ratio of elderly to
young people, raising serious concerns about future economic growth.
Also, Abe’s
administration is concentrated on fiscal reform, a very urgent task for the
world’s third-biggest economy. Public debt is far above 200 percent of gross
domestic product, the biggest debt burden among developed countries. In a bid
to end deflation, the Bank of Japan has expanded its government debt and asset
purchases in April last year to meet a 2 percent inflation target that it set
for roughly a year from now.
Why Japan raise its consumption tax?
- It is the impact of changes in the structure of the population in Japan.
These are often called age Shoushikoureika (少子 高 齢 化) is a time when people in
Japan today dominated the elderly in comparison to the amount of his birth. For
info if the percentage number of elderly in Japan is now 24.1% means 1 of 4
sets of Japanese people are elderly.
Productive people in Japan with very quickly plummeted, due to the long
life expectancy which is not comparable with young people. So that the elderly
who live in the retirement home takes a lot of health workers to serve the
elderly in Japan.The imbalance between the large number of Japanese population
that is aging with the number of births that so little, give weight to the
social security system of the State.
Fears are growing that when Japan's population is aging begins to pull
their deposits, forcing the government to rely on foreign investors to finance
its debts. And the worst case scenario that might happen is a sharp rise in the
value of the coupon / JGB yields (Certificate Broking) long-term so that the
BOJ was forced to bear the problems of government. Furthermore, if the
government loses a source of capital to finance its debts, one analyst said the
country's balance of payments will turn into a deficit in 2016/2017.
2. The main cause is the Japanese debt to the Bank of Japan which is very
high.
To cover the debt that's prime minister Shinzo Abe was forced to raise
taxes. Already severe debt that why Japan to have to do a very horrendous
maneuver this? In the data, Japan is the country's second largest debt holder
in the world after the United States. But that position is not a position that
is arguably still better than America, because when compared with the total
area of Japan that are smaller and the number of people who less than
Americans, the Japanese can be regarded as the number one debtor nation in the
world.
The third largest economy in the
world (based on GDP*) is back topped with a debt ratio of 230%. Last year, the
IMF noted Japan's debt ratio amounted to 229.77% with a GDP of US $ 5.869
trillion (USD 55 700 trillion). Source: Daily Finance (08/24/2012)
But, Japan's Finance Minister in a
statement today, Friday (09/08/2013), revealed that the total national debt of
Japan during this period reached 1008.6 billion yen precisely or 10.46 billion
US dollars (about Rp 100,000 trillion). The amount is up 1.7 percent from the
previous 3 months. The number of Japanese debt reaches twice the size of the
country's GDP.
According to the founder of the
Daily Trading Report, Bran McFadden told CNBC, Japanese big problem is they are
addicted to debt and worse than Europe. Half of the country's revenue currently
used to pay interest on the loan.
According to economists, if the
country's debt reached 90% of GDP, then certainly it would be a collapse of the
country. But Japan is an exception, in contrast to the debt in general, most of
their debt owned by his own people. Japanese government debt, as governments of
other developed countries, usually carried out on domestic society, not against
overseas. It's like the government owes sekiktar ¥ 7.5 million to each
population because 95% of the state-owned domestic debt, the economy will not
urgent as if in debt to foreigners. In addition, interest is also low.
*GDP (Gross Domestic Product) = the total value of products in the form of goods and services produced by the production units within the boundaries of a country (domestic) for one year. In the calculation of GDP, as well as the production of goods and services produced by the company / foreigners operating in the country concerned. Produced goods including capital goods which have not been taken into account depreciation, hence the amount obtained from the GDP is considered to be gross
What are the benefits of it?
+ Increase government
revenues & recover the economy
completely.
According to The
Japan Times, Japan’s fiscal situation is the worst among other developed
economies, and public debt is more than 200 percent of GDP. As a result, Japan
needs money to stimulate the economy and to repair the debt. “Increasing the
tax is widely regarded as a key to Japan’s fiscal rehabilitation”.
The Japanese government should raise taxes because
the government should aim to recover the
economy completely. According to The
Economist, raising taxes is the most effective way to improve the economy
in both growth and higher tax revenues. Almost all Japanese support Mr. Abe and
even in the Diet, he has no opposition. Therefore, “He has every chance to push
through structural reforms in this autumn’s session of the Diet, starting in
mid-October” (The Economist).
+ Prepare for the Tokyo
Olympics
The Japanese government
should raise taxes because we need to prepare
for the Tokyo Olympics. The Tokyo Metropolitan Government set aside a fund of 400 billion yen to cover the cost of hosting the Games. (according Wikipedia.com)
A lot of people, including
elderly and disabled people, will come to Japan in 2020. According to The Japan Times, “making public
facilities and transportation barrier-free will be among its more important
tasks. The number of elderly people has been increasing in Japan. and “Japan’s
total population will have passed the age of 65 in 2020” (The Japan Times).
Therefore, the Olympics is a good chances to make an environment comfortable
for them. Japan should do those things not only for elderly people but also
disabled people. According to The
Japan Times, “government should provide sufficient support to disabled
athletes as well as able-bodied ones. The government should also try to make
Japan an easier place for disabled people to live. To hold a successful
Olympics, Japan should be more a comfortable country for whoever visits Japan.
+ Will set an important example for other countries
Japan’s experience in raising the consumption
tax will set an important example for other countries. It is written by International Monetary Fund
economists in a 2011 paper when the idea of the tax was still being debated. Many advanced economies face the same challenge
to lower public debt ratios over the medium term and address rising
social-security spending while at the same time preserving growth—but they will
face it somewhat later, making Japan something of an early test case.”
+ I run out of idea. Got other ones? Comment below
What are the disadvantages?
- The decline of the Japanese Society Consumption
While the recovery of the Japanese economy in early 2014 only benefit certain people. Public salaries have not increased, and consequently when the price of goods rose due to taxes, then the ability of people to buy finished goods declined. This is potentially bad for domestic firms and states that many export their products to Japan. Low public consumption would depress demand for imported goods as well.
- Asian Economic Slowdown
Japan is one of the largest investors in Asia, including in Indonesia. Japanese investment can be found in various sectors; ranging from motor vehicle manufacturing, technology, to make bread. Thus, the Japanese recession could come dragging Asian economies. Moreover, Japan's current recession occurs when China's slowing growth and Europe suffer from stagnation. Asian economic slowdown, in turn, will impact on other areas, especially those located in the Pacific Rim
- One of the cause of Recession*
Earlier this week, Japan's GDP preliminary report again showed minus growth rate for the second time in a row. (why growth rate minus / down? Because tax rises). Once in the previous period recorded minus 7.3% on an annual basis, growth in Japan in the third quarter of 2014 was still contracted with the amount of minus 1.6%. Minus the growth rate in two consecutive periods formalize Japan's status as a country in a state of recession.
*In the macro economy, recession = condition when GDP decreased or when the real economic growth is negative for two quarters (one quarterly equals a period of 3 months) or more in one year.
- The fall in consumption
Because the tax hike will lift inflation by
about 2%. The higher inflation will reduce consumer purchasing power. As discussed above, the purchasing power will
be reduced permanently, because the
price level will be elevated.
Even if the rate
of the consumption tax is hiked by 5 percentage points to 10%, the resulting
revenue would be a drop in the bucket, especially given our aging society.
Time.com page also reported that salaries of the public has not changed much, but the price of goods and services has increased; Consequently, the welfare of the average household has not improved. So that when taxes go up, people actually reduce their spending.
- The store (e.g. supermarket) costumer would
decrease because people have purchased their own needs before the raise of consumption tax.
In Japan consumption is likely to grow strongly
in the first quarter of 2014 – as consumers bring some spending forward in
anticipation of the tax increase – but
then contract in the June quarter. To be sure, some of the big increase
is the result of companies spending earlier to avoid the tax increase. Still,
the willingness of Japanese companies to boost their capital expenditure should
pay off for Abe’s long-term plan for the economy. So, they won’t kind of spending their money on goods again after
the tax increase.
- Surplus decreased
Japan's current account surplus in July decreased by 30.6 percent compared with last year. Reported a surplus in July reached 416.7 billion yen, less than expected in the level of 444.2 billion yen. In the first quarter the Japanese economy experienced a significant growth. Consumer and business spending rose sharply because they take action to buy to improve the stock ahead of the sales tax increase in April. But after the sales tax increased consumer spending and business spending directly to sag. The Japanese government has plans to re-raise the sales tax in October 2015. Reportedly sales tax will be raised from the current back by 8 percent to 10 percent. (centuryrealtime.com)
- Other ideas? Comment below
Thanks for reading.
xoxo
-------------------------------------------------------------------------------------------------------------------------
Sources :
wikipedia.com
investopedia.com
contoh-askep.blogspot.com
centuryrealtime.com
bbc.com
Tidak ada komentar:
Posting Komentar