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The Tax System in Japan: A Need for Comprehensive Reform

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  • Thomas Dalsgaard
  • Masaaki Kawagoe

Abstract

The Japanese tax system applies relatively low marginal tax rates on most economic activities which, in combination with moderate tax elasticities of the bases, indicate that the overall distortion from the tax system (the excess burden) is probably modest compared with other OECD countries. Recent sizeable reductions in statutory marginal tax rates in both the personal and the corporate tax system have strengthened this feature. However, significant loopholes and non-neutralities are in place in key parts of the tax system, leading to potentially substantial efficiency losses once the tax-to-GDP ratio starts rising to accommodate the restoration of public finances as well as the expenditure needs related to the ageing population. There is thus an immediate need to start broadening the tax base in major parts of the system, including reducing the vast allowances and credits in the personal income tax system; incorporating bonuses in the base for social security ... Le système fiscal japonais applique des taux marginaux d’imposition relativement faibles à la plupart des activités économiques, ce qui signifie que, compte tenu de l’élasticité modérée de la matière imposable, les distorsions engendrées par la fiscalité (pression fiscale excessive) sont sans doute globalement modestes par comparaison avec les autres pays de l’OCDE. La réduction importante récemment opérée dans les taux marginaux d’imposition légaux au titre de l’impôt sur le revenu des personnes physiques et de l’impôt sur les sociétés a renforcé cet aspect. Cependant, de sérieuses lacunes et distorsions subsistent dans certains domaines importants du système fiscal, ce qui pourrait entraîner des pertes d’efficacité non négligeables lorsque la pression fiscale recommencera à augmenter en proportion du PIB pour permettre le redressement des finances publiques et pour faire face aux besoins liés au vieillissement de la population. Il apparaît donc nécessaire de commencer sans retard ...

Suggested Citation

  • Thomas Dalsgaard & Masaaki Kawagoe, 2000. "The Tax System in Japan: A Need for Comprehensive Reform," OECD Economics Department Working Papers 231, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:231-en
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    File URL: http://dx.doi.org/10.1787/707611268636
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    Cited by:

    1. Thomas Dalsgaard, 2005. "U.S. Tax Reform; An Overview of the Current Debate and Policy Options," IMF Working Papers 05/138, International Monetary Fund.
    2. Paul van den Noord & Chistopher Heady, 2001. "Surveillance of Tax Policies: A Synthesis of Findings in Economic Surveys," OECD Economics Department Working Papers 303, OECD Publishing.
    3. Bernardi, Luigi & Fumagalli, Laura & Gandullia, Luca, 2005. "Tax systems and tax reforms in south and East Asia: Overview of the tax systems and main policy tax issues," MPRA Paper 18214, University Library of Munich, Germany.
    4. Wolfgang Ochel & Rigmar Osterkamp, 2007. "What Does the Institutions Climate Index for OECD Countries Tell us about Institutional Change and Economic Policy Reforms?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 5(1), pages 50-62, 05.
    5. Thomas Dalsgaard, 2008. "Japan’s Corporate Income Tax—Overview and Challenges," IMF Working Papers 08/70, International Monetary Fund.
    6. Bernardi, Luigi & Gandullia, Luca & Fumagalli, Laura, 2005. "Tax Systems and Tax Reforms in South and East Asia: Overview of Tax Systems and main policy issues," MPRA Paper 1869, University Library of Munich, Germany.

    More about this item

    Keywords

    imposition; Japan; Japon; taxation;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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