The Household Consumption Tax Burden in Japan (in Japanese)

In Japan, many previous studies have analyzed the household consumption tax burden. Most of these focused on whether or not a reduced tax rate for food and necessities should be used to alleviate the regressivity of the tax. However, from the perspective of economic theory, this direction of research is misleading, as Crawford et al. (2008) discuss in Mirrlees Review, a recent report on comprehensive tax reform in the United Kingdom. According to that theory, there are two problems with previous research in Japan: First, the theory says the burden of the consumption tax is not regressive but proportional. Second, direct income redistribution, such as allowances and refundable tax credits, is more effective than reduced tax rates for helping needy families. Based on the argument above, we reanalyzed the household consumption tax burden in Japan. We modified the micro simulation analysis used by Tajika and Yashio (2007) to investigate not only the household burdens for income tax and social security contributions but also the consumption tax burden. Finally, in this study we discuss the effects of various tax reforms on household burden, including a consumption tax hike, the introduction of reduced tax rates for food, and a combination of a consumption tax hike and the introduction of refundable tax credits for income tax.