A Japanese advisory committee comprised of business executives, academics and labour leaders has recommended that Prime Minister Yoshiro Mori raises the 5% sales tax to increase revenue.
Japan has the largest debt amongst leading industrial nations, with the budget deficit expected to reach 10% of this year's GDP. However, it also has low income and corporation tax rates, which means there is no possibility of increasing spending by lowering tax rates.
Another option suggested by the panel would be to increase the minimum tax bracket. According to the Ministry of Finance, the minimum taxable income for a family of four in Japan is $34,000 compared with $21,833 in the US.
The panel's report is only a recommendation and there is little indication that the government will adopt it any time in the foreseeable future. Mori has said that he will not raise taxes until the economy is growing at a rate of 2% a year, which is not predicted to occur for a minimum of two years.
