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The Tax System in Japan: A Need for Comprehensive Reform

Listed author(s):
  • Thomas Dalsgaard
  • Masaaki Kawagoe

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 ...

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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 231.

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Date of creation: 04 Feb 2000
Handle: RePEc:oec:ecoaaa:231-en
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