Prime Minister Shinzo Abe is expected to name former industry minister Yoichi Miyazawa as chief of his Liberal Democratic Party’s tax panel, replacing Takeshi Noda, to ease tensions within the ruling coalition over how to soften the impact of a planned consumption tax rate hike, a senior party lawmaker said Saturday.
After the replacement, the LDP and its smaller partner, the Komeito, are likely to shift to the feasibility study of implementing a multiple sales tax rate from a Finance Ministry-proposed tax refund scheme backed by Noda, coalition sources said.
The ruling coalition aims to include a mitigation measure in the fiscal 2016 tax reform package to be compiled at the end of the year.
Miyazawa will chair the LDP Research Commission on the Tax System, which plays a key role in drafting annual tax reforms in Japan, replacing Noda, who has stoked tensions about how to soften the impact on households from higher consumption tax.
Talks between the two parties have stalled since Sept. 25 as Noda, who took up his post in 2009, has shown reluctance to accept calls from the Komeito to cut the sales tax rate on daily necessities in support for lower-income households.
The Komeito has proposed multiple rates be introduced when the tax is raised to 10 percent from the current 8 percent in April 2017.
That alleviation measure is believed to reduce the nation’s tax revenue by around 1 trillion yen ($8 billion), however.
Noda remains cautious about the system, saying it would be costly for businesses to prepare. He is backed by some ruling lawmakers as well as the Finance Ministry, which fears the multiple rates would reduce efficiency in raising state revenues.
Noda tried to promote the Finance Ministry’s tax refund plan that would see a 10% tax rate levied on all items, with the government providing 2% tax refunds for all food and beverage purchases excluding alcoholic drinks.
The Komeito objected to the idea as it prefers a multiple tax rate, as widely adopted by European countries.
The issue has cast a shadow over the prospects for cooperation between the two parties in next year’s upper house election, apparently prompting Abe to replace Noda. Miyazawa is expected to take the post as early as next week.