[talk] Is Fiscal Balance a Purpose of Taxation Reform?

Tadashi Ogawa: Representative Director and Chairman of the Board of Japan Tobacco Inc.

Tadashi Ogawa was born in 1940 in Tokyo. He joined the Ministry of Finance after graduating from the University of Tokyo, Faculty of Law. He served as Director-General of the Tax Bureau and Commissioner of the National Tax Agency before assuming the position of Administrative Vice Minister of the Ministry of Finance. He retired from this position in 1997 and became a visiting professor for the Research Center for Advanced Science and Technology, the University of Tokyo. He assumed the incumbent position of Representative Director and Chairman of the Board of Japan Tobacco Inc. in June of 2001. His published works include Tobacco Shouhizei Shoukai (Detailed Explanation of Tobacco Consumption Tax) (co-written).

Naohiro Yashiro: President of Japan Center for Economic Research

Naohiro Yashiro was born in 1946 in Osaka. He graduated from the School of Economics at the University of Tokyo, and received a doctoral degree in economics from the University of Maryland, USA. He had worked for the Economic Planning Agency and OECD, served as a Professor of Economics at the Institute of International Relations, Sophia University, before assuming his current position as President of the Japan Center for Economic Research in 2000. He is also a member of the Council for Comprehensive Regulatory Reform and the Council for Gender Equality. His major published works include: Nihonteki Koyou Kanko No Keizaigaku (Economics of Japanese Employment System), Shoushi /Kourei-ka No Keizaigaku (Economics of Declining Population and Aging), and Shakaiteki Kisei No Keizai Bunseki (Economic Analysis of Social Regulation).

Prime Minister Koizumi gave direction to consider taxation reform to vitalize the economy. However, the answers to this issue differed largely in terms of its purpose between Mr. Tadashi Ogawa, the former Administrative Vice Minister of the Ministry of Finance, and Mr. Naohiro Yashiro, although their basic understanding was the same. As for the canons of taxation, both agreed that it is important to understand that, in the first place, the current taxation system does not strictly comply with the canon of ñfairness, simplicity and neutrality,î and the basic idea of the reform is to remedy this gap. They believe that using taxation as a measure for structural reform does not contradict the principle of ñneutrality.î Mr. Yashiro pointed out that this kind of argument ñuses up energy that could be spent discussing reform in areas that are aberrant from its original purpose.î As for the purpose of the taxation reform, Mr. Ogawa insisted that its basic idea is to recover the fiscal balance and not to stimulate the economy in the short term. However, Mr. Yashiro, although showing a certain level of understanding of this opinion, stated that ñalthough a long-term improvement of public finance is necessary, reform that has an impact on business activities in the private sector should be put forth at the same time,î insisting the need to sow the seeds of tax revenue improvement by stimulating the supply side. This opinion from Mr. Ogawa basically coincides with the current view of the Ministry of Finance. There are several weak points in this opinion, such as the concern towards the previous and current taxation system, which is no longer able to obtain enough tax revenue because of the repeated economic stimulus, or the question on the fact that the basic idea (that the burden of tax is shared among the public in order to generate fiscal expenditure) is ignored in the discussion on taxation reform. Both agreed that the taxation reform should be put forth in consistence with pensions and social security. What is completely absent in the current discussion on taxation reform is a conversation about the entire vision, suggesting which direction Japan must go in the future, together with analysis on the past examples. Mr. Ogawa says that the specific plans of government revenue and expenditure come after this. Both criticized the delay in setting a vision for the future in Japan. To this end, Prime Minister Koizumi should first speak out about the concept, or else the taxation reform will be one in name only.