We strongly demand revocation of planned consumption tax increase

Statement by ODAGAWA Yoshikazu
Secretary General, National Confederation of Trade Unions (Zenroren)

Prime Minister ABE Shinzo on October 1 announced that the consumption tax rate will be raised in April next year to 8 percent from the present 5 percent, as planned.

He clearly defies the majority of the public who firmly opposes the tax increase, as it is expressed in various public opinion surveys. We strongly protest against his decision to the measures that force the people to pay an extra 8 trillion yen (about 80 billion dollars) in tax.

The National Confederation of Trade Unions (Zenroren) is determined to continue its fight against the Prime Minister’s “decision” and the planned consumption tax increase. We call on all the workers to take part in this struggle.

Under Article 18 of the Supplementary Provisions of the Revised Consumption Tax Act, the consumption tax would be raised if the economic conditions improved. Various government data show that while large corporations’ business performance appears on a recovery track, small- and medium-sized businesses, which hire a majority of the nation’s workers, are still in difficult conditions and their improvement is not in sight.

The unemployment rate was 4.1 percent in August, up 0.3 percentage points from the previous month. The number of people who are out of work has increased to 2.72 million. Wages fell by 0.6 percent from a year earlier. The average wages that do not include overtime or any other extra work pay has declined for 15 straight months. Household spending in August was down 1.6 percent from the previous month.

Every indicator shows that the livelihoods of workers and the people in general are not improving at all. The situation does not support the argument that there are conditions that pave the way for a consumption tax increase. This is why Prime Minister Abe’s “decision” does not fulfill the requirement of the law.

Prime Minister Abe has said he will also come up with a 6 trillion yen package to avoid adverse impacts that the consumption tax increase may have on the economy. Taking new economic measures to make it easier to raise the tax is in itself a contradictory policy.

At the same time, the economic package, which the government is considering, is intended to mostly benefit some large corporations. In fact, the consumption tax increase is nothing but a wealth transfer from the people to the large corporations.

The main elements of the economic package are a plan to end a year earlier than planned the special corporate tax for the post-disaster reconstruction and public investment in the building of infrastructure with the 2020 Tokyo Olympic Games in mind. Consumption tax revenue will not be used to secure the social security programs or to rebuild national and local finances. It is clear that the aim of the consumption tax increase is to secure money for influence peddling through favorable treatment of large corporations and contracts for public works projects.

Tax breaks are being considered to induce companies to raise wages. If a company increased before-tax wages by 2 percent, it would get certain tax-deductions.

If the company offers a yearly wage increase, it will be enough to get such deductions.

The fact is that 70 percent of companies, mostly small- and medium-sized firms, cannot afford even to pay corporate taxes and unable to get such benefits.

A detailed analysis would convince us that we can expect nothing from the package in terms of a taxation system that is effective for promoting wage increase.

Estimates by experts show that raising the consumption tax by 3 percentage points amounts to a 2 percent wage cut. They argue that, the Abe administration’s plan to achieve 2 percent inflation requires a 4 percent wage increase.

Prime Minister Abe insists on achieving the rebuilding of the economy and improvement in fiscal health at the same time. If that is the goal, the government must give up raising the consumption tax and instead make efforts to create sustainable business cycles through taking direct measures to help small- and medium-sized companies raise wages and expand domestic demand. The government should urge large corporations to use a part of their huge amounts of internal reserves for wage increase.

We reiterate our demand that the government revoke the plan to raise the consumption tax from April 2014 and carry out related measures, which would force the workers and people in general to endure heavier taxes and which would give large corporations tax cuts, and that it shift its economic policy to one of defending people’s living conditions.