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Reforming the Tax System in Japan to Promote Fiscal Sustainability and Economic Growth

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  • Randall S. Jones
  • Masahiko Tsutsumi
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    Abstract

    Tax reform is an urgent priority, as Japan needs as much as 5% to 6% of GDP of additional government revenue just to stabilise public debt, which has risen to 180% of GDP. In addition to raising revenue, tax reform should promote economic growth, address the deterioration in income distribution and improve the local tax system. Additional revenue should be obtained primarily by increasing the consumption tax rate, currently the lowest in the OECD area, while broadening the personal and corporate income tax bases. The corporate tax rate, now the highest in the OECD area, should be cut to promote growth, while eliminating aspects of the tax system which discourage labour supply and distort the allocation of capital. Japan should also consider introducing an Earned Income Tax Credit to promote equity. The local tax system should be simplified, increasing reliance on existing taxes on property, income and consumption. Réformer la fiscalité au Japon pour promouvoir la viabilité budgétaire et la croissance économique La réforme fiscale est une priorité urgente : l’État japonais doit se procurer des recettes supplémentaires à hauteur de 5 à 6 % du PIB pour simplement stabiliser la dette du pays, qui atteint désormais 180 % du PIB. Au-delà de cette progression des ressources, la réforme fiscale devrait promouvoir la croissance économique, faire face à la dispersion croissante de la distribution des revenus et améliorer la fiscalité locale. Les recettes supplémentaires devraient provenir pour l’essentiel d’une augmentation du taux de la taxe sur la consommation, qui est actuellement le plus faible de toute la zone OCDE, et de l’élargissement des bases d’imposition des revenus des personnes physiques et morales. Les autorités devraient abaisser le taux de l’impôt sur les sociétés, aujourd’hui le plus élevé des pays membres de l’OCDE, afin de promouvoir la croissance, et supprimer les mécanismes fiscaux qui sont préjudiciables à l’offre de main-d’oeuvre et perturbent les affectations de capital. Le Japon devrait aussi envisager, pour favoriser l’équité, l’instauration d’un crédit d’impôt sur le revenu d’activités professionnelles. La fiscalité locale devrait bénéficier de mesures de simplification et s’appuyer davantage sur les impôts et taxes déjà en vigueur en matière foncière et immobilière, ainsi que sur les revenus et sur la consommation.

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    File URL: http://dx.doi.org/10.1787/230312273167
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    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 650.

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    Date of creation: 01 Dec 2008
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    Handle: RePEc:oec:ecoaaa:650-en

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    Keywords: tax reform; participation rates; female employment; property tax; consumption tax; tax progressivity; labour tax wedge; tax expenditures; personal income tax; corporate income tax; local taxes; earned income tax credit; Japanese tax system; réformes du système des impôts; fiscalité; impôt sur les bénéfices; progressivité de l’impôt; système de taxation japonais; crédit d’impôt sur le revenu d’activités professionnelles; activité des personnes sur le marché du travail; fiscalité locale; taxe foncière; taxe à la consommation; dépense fiscale; impôt sur le revenu;

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