Japan - shelves tobacco tax hike for 2009..

December 12, 2008 - The Japanese government and the ruling parties decided Thursday, December 11, 2008 to shelve a plan to raise the tobacco tax, one of the key elements of tax reform for fiscal 2009, according to government sources. On December 2, 2008 we reported that the Japanese ruling Liberal Democratic Party (LDP) planned to push for a tobacco tax hike for fiscal 2009 starting in April.

Following the decision, Prime Minister Taro Aso ordered Liberal Democratic Party Policy Research Council Chairman Kosuke Hori to find an alternative source of revenue to the tobacco tax hike. With the tax hike having been shelved, Aso faces the difficult task of finding an alternative way of boosting social security funding, observers say. The government had studied a possible tobacco hike as a stable revenue source to enable it to reduce cuts to the projected natural annual increases in social security spending. But the plan to raise the tobacco tax faced growing opposition from some LDP and New Komeito members that insisted there was no guarantee that the tobacco tax hike would help boost tax revenue.

Reference: Japan shelves tobacco tax hike, The Yomiuri Shimbun, Asia News Network, 12/12/2008.

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