[talk] What Is Our Common Perception for Taxation Reform?

Hiromitsu Ishi: Chairman of the Government Tax Commission, President of Hitotsubashi University

Hiromitsu Ishi was born in Tokyo in 1937. He completed the Graduate Course of Economics at Hitotsubashi University in 1965. He later became a professor for the Faculty of Economics at Hitotsubashi University in 1977, and held a position as visiting professor for several universities including the University of Michigan and the University of New South Wales (Australia). In 1993, he assumed the position of dean of the Faculty of Economics at Hitotsubashi University and has been serving as the President of the same university since 1998. In addition to his role as a special member of the Fiscal System Council, he also holds positions as the Vice President of the Japan Association of National Universities and as a provisional member for the Central Council for Education in the Ministry of Education, Culture, Sports, Science and Technology. His major published works include The Japanese Tax System 3rd ed. (Oxford University Press, 2001) and Making Fiscal Policy in Japan (Oxford University Press, 2002)
Zeisei Watching (Fiscal System Watching), Kankyo-zei Towa Nanika (What is Environment Tax?) and Kuni No Shakkin (Debt of the Country).

Masaaki Honma: Member of the Council on Economic and Fiscal Policy, Professor for the Graduate School of Economics at Osaka University

Masaaki Honma graduated from the School of Economics at Osaka University in 1967. He withdrew from the Doctoral Course of Economics at the same university in 1973. He had served as visiting professor for Warwick University in the U.K., visiting researcher for STICERD at the University of London and Vice President of Osaka University before assuming his current position as a professor for the Graduate School of Economics at Osaka University. He is also a member of the Council on Economic and Fiscal Policy and the Tax Research Commission. His major published works include Sozei No Keizai Riron (Economic Theory of Taxation), Shin Nihon Gata Keizai System (New Japanese-type Economic System) and Nijuuisseiki Nihon Gata Fukushi Shakai No Koso (Concept of the Japanese-type Welfare Society of the 21st Century).

Talks between Mr. Hiromitsu Ishi and Mr. Masaaki Honma started with a criticism of the press for exaggerating the differences in the opinions of the Tax Research Commission and the Council on Economic and Fiscal Policy, which in reality generally coincide. Mr. Honma pointed out that there still can be seen attitudes among ministries to set aside the discussion in the Council on Economic and Fiscal Policy. However, he also explained that there are separate roles in taxation reform for both, such as that the Council on Economic and Fiscal Policy will be in charge of the basic policy and the Tax Research Commission will study the details of the design; and although there are minor conflicts near the border, they had agreed to cooperate by overcoming those gap. As for the purpose of taxation reform, Mr. Ishi showed a willingness to promote reform based on the “ideal taxation theory,” which is to remedy the mismatch between the changes in the socioeconomic structure since the postwar period and the taxation system. On the other hand, Mr. Honma pointed out the necessity of strategy for the reform evolving around stimulating the economy as well as remedying the mismatch. Although Mr. Ishi expressed a concern towards the danger that the stimulating may be dragged by the urgent need to revitalize the economy, he showed a general understanding of this opinion. Both agreed that economic growth was more appropriate as a purpose of taxation reform rather than a change in the canons of taxation, such as neutrality and vitality, which does not fundamentally conflict with the current state. They also agreed with the idea of “widening the tax base and declining the tax rate,” besides the timing of its realization, in the area of income tax and corporate tax. As for the tax mix of Japan in the future, their common understanding was that, although it is necessary to correct the income tax system which is full of loopholes, income tax should remain a core of taxation. They also agreed that an increase in consumption tax is inevitable. In this regard, Mr. Ishi insisted on enhancing the system of imposing tax on assets from the perspective of impartiality, while Mr. Honma objected to the idea of inheritance tax reduction. As for the relation between the taxation reform and the balance of government finances, Mr. Honma suggested the basic policy of the Council on Economic and Fiscal Policy, such as that tax reduction shall be compensated later by combining it with spending reduction. On the other hand, Mr. Ishi pointed out that it is hard to adapt the concept of a progress schedule in the case of taxation reform, which is also indicated from past experience, and that it is inevitable for the Tax Research Commission to consider the possibility of increase in revenues in the course of correcting the distortion of tax on a long-term basis. However, Mr. Ishi did not deny the idea of a policy tax reduction as a short-term anti-deflation policy, provided that it would be a truly effective measure for revitalizing the economy, and that there would be a prospect for funds.