Tax

Japans new inheritance tax plan

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Tax
Written by Gary Howes   
Tuesday, 18 May 2010

How increasing inheritance tax in Japan could get the economy moving again.

 

The International Monetary Fund predicted that Japan’s gross debt-to-GDP ratio could rise to 250 per cent over the next five years.

Indeed some analysts predict that unless the Japanese economy gets moving strongly again Japan, and given the right trigger, the country could face a Greek-style sovereign debt debacle.

In view of the fiscal imbalances imposed on Japan by an aged population the Japanese Government is considering a radical rebalancing of inheritance tax law that could siphon trillions of yen from the savings of the elderly into the freer-spending wallets of the young.

According to The Times the proposed plans come amid rising fears that, with the worst fiscal position of all developed nations, Japan may be teetering towards the brink of its own debt crisis.

The new proposal, which would involve inheritance tax being raised significantly higher and the gift tax slashed to about half its present levels, will be included in the ruling Democratic Party of Japan’s manifesto when it is published this month.

The idea is to persuade older Japanese, who sit on vast savings, to pass their money on to their children now, rather than waiting to leave it to them in a will.

The younger recipients, runs the theory, will spend more and boost the economy.

 

Aging crisis


Although the population of the elderly in Japan accounted for only 7.1 percent of the total population in 1970, 24 years later in 1994, it had almost doubled in scale to 14.1 percent.

In other countries with an aged population, it took 61 years in Italy, 85 years in Sweden, and 115 years in France for the percentage of the elderly to increase from 7 percent to 14 percent of the population.

These comparisons clearly highlight the rapid progress of demographic aging in Japan.

On the other hand, the percentage of the younger age population in Japan (0-14 years) has been shrinking since 1982.

In 2008, the younger age population amounted to 17.18 million, accounting for 13.5 percent of the total population, the lowest level on record since the Population Estimates began. The working-age population (15-64 years) totaled 82.30 million, continuing its decline since 1996.

In share terms, it accounted for 64.5 percent of the entire population. As a result, the ratio of the dependent population (the sum of the elderly and younger age population divided by the working-age population) was 55.2 percent.

In terms of their proportion of the total population, the elderly have surpassed the younger age group since 1997.
 
 
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