IMF suggests Japan to triple consumption tax

The International Monetary Fund said Monday that Japan ought to triple its consumption tax to help bring down some of its huge debt.

Japan s current tax rate on consumption is only five percent, one of the lowest rates in the world, said Anoop Singh, the IMF chief for Asia.

“It has been our sense… that raising the consumption tax gradually, not immediately, beyond 2015 to say 15 percent, would be more in line with the tax rate in other countries,” he said.

Prime Minister Yoshihiko Noda has already proposed doubling the tax to 10 percent, but has run into stiff public and political opposition to the move.

Singh said the IMF welcomed his plan, adding that the government needs to take action to cut its debt level, which at about 200 percent of GDP is the highest among developed economies.

“In some way (increasing) the consumption tax is the most appealing measure to take,” Singh said.

“It is more growth-friendly and less distortive than other options.”

“That along with the other reforms in social security and other spending, as a package, would then bring the debt ratio down,” Singh added.