11/01/2011 Representative questioning (Tax Increase, TPP, Radiation)

I’m Yasuo Tanaka, speaking on behalf of New Party Nippon and its parliamentary partner, the People’s New Party.

Japan is filled with impatience and cloaked in a reclusive mood, as it faces a planned major tax increase, the TPP and radiation contamination.

As far as the consumption tax increase is concerned, Finance Minister Jun Azumi made an international pledge last month at the G-20 meeting in Paris. He said he will submit a bill to raise the nation’s consumption tax rate to 10 percent at the next year’s ordinary diet session. He also told the same thing to Mr. Hiromasa Yonekura, the Chairman of the Keidanren, the Japan Business Federation.

On the other hand, Prime Minister Yoshihiko Noda didn’t even touch on the consumption tax issue in his policy speech. Why is he trying to push through with it without even making a proposal or holding discussions at the nation’s highest institution? Is Mr. Azumi’s international pledge an excuse to make that happen?

No country in the world has ever succeeded in bolstering its economy by a tax increase. We, New Party Nippon and its ruling parliamentary group partner, the People’s New Party, have constantly warned the government against it. The September 28th agreement reached by the government and the ruling party clearly states they will make utmost efforts in securing financial resources other than tax revenues. The agreement also calls for the sale of Japan Post shares. Mr. Noda apparently must be determined to do everything he can to secure non-tax financial revenues. Mr. Noda, would you please show your faith and grace in passing the postal reform bills at the current session of the diet.

Restoring the dignity of ‘a mature society in pastel colors,’ in which everyone can live the life of a middle class citizen, is the basic philosophy of New Party Nippon and the People’s New Party. Establishing a mechanism to ensure ‘social fairness’ is particularly important in carrying out tax reform. I will give you two examples to prove how extremely unfair the Japanese tax system is.

First, export drawbacks.
It’s a tax refund system which allows exporters to make refund claims for the consumption tax they pay while manufacturing products in Japan. Every year, three trillion yen gets reimbursed to exporters through the system. Nation’s top ten exporters current benefit one third of it, one trillion yen, every year. The system is nothing new and has also been introduced in other countries as well.

But the system isn’t without problems. Japan is the only country which hasn’t introduced the Invoicing system that should be in place along with the tax refund system. Invoicing is indispensable in certifying how much consumption tax a company has paid. Not only the final distributors but material suppliers and component manufacturers are also paying the consumption tax in Japan.

But because Japan has yet to introduce the Invoicing system, export drawbacks are claimed and collected only by the final distributors. Super large automakers, electronic appliance, machinery and electronics companies are the only ones benefiting from the system. Small and medium-sized companies which supply material or produce components aren’t benefiting at all. If the consumption tax is raised to 10 percent, the amount of refunds which go to big corporations will double to 6 trillion yen.

When Mr. Yasuhiro Nakasone was the prime minister, he sponsored a bill to introduce the sales tax system which clearly included Invoicing . His aim was to eliminate unfairness. The measure was intended to provide ‘seeds of hope’ to people who are the backbones of the Japanese manufacturing industry.
I hear Mr. Noda recently visited Mr. Nakasone and sought advice from him.
So, Mr. Noda shouldn’t have any reservations about introducing the Invoicing system.

Second, pro forma standard taxation.
On February 8th of this year, I asked Mr. Noda what is the percentage of businesses that are NOT paying the corporate tax. He said ‘70 percent.’ I believe the figure hasn’t changed.
Nearly 60 percent of the major corporations whose capital tops 100 million yen aren’t paying the corporate tax at all. The percentage is even higher among super big corporations adopting consolidated accounting practices. Sixty-six percent of them aren’t paying the corporate tax at all.

What’s causing this outrageous situation is the current taxation system which imposes tax on profit. For instance, a major corporation with positive earnings buys an insolvent company strategically to turn its consolidated earnings into the red. Then, that major corporation will automatically be exempt from paying corporate taxes for a period of up to 7 years, even if its earnings returns to the black the following year.
Such corporation will also be exempt from paying all corporate enterprise taxes which are the regional tax. All this company is obligated to pay is 800 thousand yen in the prefectural corporate tax which is comparable to the residency tax for individual citizens.
Unless changes are made, major businesses will continue to make profits from the system while smaller companies continue to suffer. It’s the heaven and hell created by the extreme market fundamentalism and nothing has ever been done to rectify the situation.

Thirty percent of the businesses are gasping with heavy burden imposed on them. On the other hand, the remaining 70 percent is living off the fat of the land. It’s indispensable for the government to introduce the pro forma standard taxation system to correct the outrageous situation. Under the pro forma system, taxes are imposed on expenditures instead of corporate profit. Taxes will be collected widely and thinly from businesses. Mr. Prime Minister, I’d like to know whether you are prepared for and capable of introducing the pro forma standard taxation system before deciding on a consumption tax hike.

I also want to challenge the prime minister on his determination and capability to implement the following proposals. I’ve been demanding the issuance of non-interest-bearing tax-exempt government bonds and the public use of dormant bank deposits whose interests are turning unearned annual income of 100 billion yen for financial institutions.

Can Japan benefit from joining the TPP in any way?
I believe the TPP is a Trojan horse. It’s like a wolf in sheep’s skin. It doesn’t promote free trade. It promotes protectionism. It sponsors an anachronistic, block economy which makes the US the sole winner. It can’t possibly be a free trade but a trade inhibition agreement for Japan. I have repeatedly warned the Diet against the TPP since a budget committee meeting on November 8th.

TPP stands for Trans-Pacific Partnership. But it’s translated as Pan-Pacific Partnership in Japanese. None of the countries in the Pacific Rim such as Canada, Mexico, China, South Korea nor Taiwan is participating. Neither is Indonesia, the Philippines nor Thailand. These countries haven’t even been invited to participate, either. As the English name indicates, TPP is not Pan-Pacific as translated in Japanese, but Trans-Pacific as the English name stands. Isn’t the Japanese translation misleading? Isn’t this translation mistake intentional?

Mr. Noda says he wants to start 3-party FTA talks with China and South Korea next year. Well, Mr. Noda and Mr. Yukio Edano who is the economy and industry minister. Let’s assume, although I don’t think it’s possible, the TPP will brings us a bright future. Then, why isn’t the government urging China and other countries to join as well? What happened to the famous ‘Brotherly Love’? I assume it will probably be easier, as the saying goes, ’there’s nothing to be afraid of crossing against the red light, if everyone does that together.’
Some TPP proponents say TPP will be a Japan-US alliance to contain China. That’s a big misunderstanding. TPP will alienate Japan from the rest of Asia. It’s a poison which will deplete Japan’s strength.

There’s a reason why Japan isn’t inviting China.
As a matter of fact, China has already taken over the US as Japan’s biggest export destination. Fifteen years ago, China was buying only one-sixth of what the US was buying from Japan. And in the Chinese market, Japan is competing with Germany mainly in machinery and other intermediate commodities. If Japan joins TPP and China feels left out of the loop and signs a free trade agreement with the European Union to counter the situation, the Chinese intermediate commodities market will be dominated by German suppliers and Japan will suffer a devastating defeat in the field of automobiles and high speed railways.

Problems with TPP go beyond agriculture. Medicine, finance, insurance and the list goes on. If radio waves and the information and telecommunications industry are liberated, scandal-tainted media-mogul Rupert Murdock may control Japan’s television industry. Don’t you realize, Mr. Prime Minister? The TPP will have a devastating impact on Japan’s manufacturing industry, which is the pillar of the nation’s economy.

According to the World Bank, Japan’s average tariff rate is already lower than those of the EU and the US. On the other hand, the US is imposing a 2.5 % import tariff on Japanese automobiles. The EU is imposing four times more than that, which is 10 %.
Isn’t the government making mistakes in prioritizing in removing tariff barriers?

There’s more. According to the government, the economic impact from the TPP would be 270 billion yen a year, which is only 54 thousandth of a percent of the nation’s GDP. That’s not even enough to pay for one half of the budget earmarked to individual income security benefits for farmers for this fiscal year alone. What’s your take on this?

Japan has already signed free trade agreements with six out of nine countries which are planning to participate in the TPP. Japan should also start negotiating with China, South Korea and the EU for the signing of a free trade agreement. Continuing efforts in finalizing FTA with respective countries should be the approach to be taken by the Noda government, if he indeed thinks ‘down-to-earth’ is what he is.

The US is the one missing boat and losing patience. Why is Japan so desperate trying to push the panic bottom? Some argue Japan can even get off the boat in the course of the negotiations. It’s like a man who’s tone-deaf, asking a woman to discuss their engagement arrangements while telling her he may break them off and still thinks that’s OK. Japan shouldn’t be acting like a big baby. Such diplomacy of ‘Dependence’ won’t produce any seeds of hope. It will cause Japan to make a fool of itself instead. Such behavior will discredit Japan and diminish the honor of its partner nations.

Mr. Noda may be surrounded by experts and CEOs who are enthusiastic proponents of the TPP. But there are many others who are experts and strongly against the TPP. Among them are Mr. Hirofumi Uzawa, who is a candidate for the Nobel Prize in economics, Mr. Eisuke Sakakibara, Mr. Iwao Nakatani, Mr. Yukio Noguchi, Ms. Noriko Hama, who espouse the philosophy of the free market economy. They are unanimously opposed to Mr. Noda’s plan to announce Japan’s participation in the TPP talks. They say the TPP will seriously and adversely affect Japan’s manufacturing and service industries.

At the Tokushima prefectural government assembly, 41 lawmakers including a DPJ member who once served as secretary to a chief cabinet secretary and Your Party members voted to oppose Japan’s participation in TPP talks. Already in 44 prefectures across the nation, assembly members have voted overwhelmingly against Japan’s participation in the TPP or have voted to support a resolution calling for caution.
My colleagues on the floor!
Now is the time to make the Diet function.

Mr. Noda pledged in his policy speech he will discuss the issue thoroughly. But when will he have discussions?
Opinions remain split over the issue, even within the DPJ.
The TPP will strip Japan of social fairness and economic liberty simultaneously. The TPP is a wolf in sheep’s skin which will destroy people’s dream of achieving a society, where everyone can be a middleclass citizen.

Japan’s average tariff rate is lower than that of the US and the EU. Japan opened its doors to the rest of the world long, long time ago. If we make changes, we should be making them for the better, nor for the worse. We should be complementing our shortcomings.

Exactly 100 years ago, Jutaro Komura made efforts to restore Japan’s tariff autonomy. We just cannot allow this government to abandon the hard-gained autonomy which supports the foundation of this country. Such move won’t change Japan for the better. It can even destroy it.
How can we explain such setback to our children in the future?

My fellow colleagues on the floor!
Let’s pull together to stop the government from announcing its intention to participate in the TPP talks. It’s for the benefit of the people and for the sake of the country.

When a person in front of you is at a loss what to do……it doesn’t matter whether the person is your husband or wife, or your children or a friend….it doesn’t matter if it’s China or the US you are dealing with. We need to make sincere efforts in showing him the right way. That’s what we call, ‘a friend in need is a friend indeed.’

My ruling coalition partners from the DPJ!
Please remember your original intentions.
People’s living must come first.

My fellow academics on the floor!
Let’s stand up together with our decent people of Japan
Let’s work together to rebuild a Japan we can trust.

I hereby conclude my questioning on behalf of the People’s New Party and New Party Nippon.

Thank you.