There are many arguments for raising Japan s consumption tax rate.

For example, we can choose how much to collect via a general income tax, a payroll tax, a consumption tax (such as a sales or value added tax), and so on.

The Fair Tax Act ( ) would apply a tax, once, at the point of purchase on all new goods and services for personal consumption.

Tax hikes lower consumption and raise revenue in the medium term a 10 higher tax means about 7 higher revenue over the medium term.

Japan s government has a huge debt burden, and its consumption tax rate is far lower than the value added tax rates that prevail in Europe.

A carbon tax has also been proposed as a method to reduce consumption of fossil fuels.

But a consumption tax hike is no panacea, particularly given the government s lack of a growth strategy.

It was too heavily tilted toward tax cuts that would tend to boost saving rather than consumption.

When Kan led the DPJ in opposition, he avoided discussing any raise in the rate of consumption tax.

To strengthen purchasing power and to stimulate consumption, tax cuts on low and medium income households are essential.

Higher household saving depresses consumption because it is the difference between households after tax income and what they spend.

And yet, while the consumption tax increase is not ideally timed, I am not entirely pessimistic about its impact.

(Another case with similar consequences was Japan s value added tax increase in 1997, which precipitated a collapse of consumption).

Raising revenue through tax reform will have to mean reducing the special deductions and exclusions that now lower tax receipts.

By imposing a stiff tax on energy consumption, Europeans would reduce both consumption of energy and its price in world markets, in turn cutting the flow of funds to Russia and Iran.

On the revenue side, as many as 63 developing countries are considering raising consumption taxes, such as the value added tax.

One possibility is an increase in the consumption tax, which currently stands at 5 low in comparison with other industrialized countries.

Japan s new government, led by Prime Minister Naoto Kan, started discussing a consumption tax hike to offset the growth in spending.

Protecting water resources from contamination and excessive consumption will be a special area of focus.

They state that replacing the current tax system with a consumption tax would not change the tax revenue generated from the underground economy while illicit income is not taxed directly, spending of income from illicit activity results in business income and wages that are taxed.

If consumers expect that their taxes will rise in the future, they may decide to save the tax cut rather than boost consumption.

These revenue losses could be offset by curtailing so called corporate tax expenditures deductions, credits, and other special tax provisions that subsidize some economic activities while penalizing others and broadening the corporate tax base.

But Europe can fight back. By imposing a stiff tax on energy consumption, Europeans would reduce both consumption of energy and its price in world markets, in turn cutting the flow of funds to Russia and Iran.

Monetary subsidies to consumption are also often granted in developed countries for a variety of purposes, not least of which is fighting tax evasion.

Nonetheless, with Japan s economy just beginning to recover from more than 15 years of stagnation, such a steep consumption tax hike is not advisable.

Shifting consumption to investment via tax increases is possible, but too problematic politically, with the burden sharing issue usually leading to impasse and inaction.

By imposing a sales tax, supporters argue that black market activity would be taxed when proceeds from such activity are spent on legal consumption.

The DPJ suffered a bitter defeat in this summer s upper house election, after Kan abruptly proposed a significant increase in the highly unpopular consumption tax.

The Government has established a special legal and institutional framework for the emergence and development of the maquiladora industry, which enjoys special tax treatment.

A tax cut to low income individuals or increased unemployment benefits would have provided far more stimulus to consumption, just as a temporary investment tax credit would have boosted capital spending far more than reducing taxes on dividends did.

With Hatoyama continuing to oppose an increase in consumption tax in the next four years, the issue will be a test of the government s fundamental seriousness.

Rather than punitively taxing wealth, globalization strengthens the case for shifting to a flat tax on income (or better yet consumption) with a moderately high exemption.

If households and firms anticipate a tax increase in the future as a result of government borrowing today, they will reduce their consumption and investment accordingly.

Governments can provide funding, real estate, staff and a special designation as tax abated enterprise development zones.

The first two arrows of Abenomics were aimed at stimulating demand and they were extremely effective. The consumption tax hike was needed to sustain them in flight.

But the US has done a great deal in terms of adopting tax cuts that boost consumption relative to income and lower government revenue relative to expenditure.

In 2013, as transfer payments are phased out, however gradually, and as some tax cuts are allowed to expire, disposable income growth and consumption growth will slow.

It acts as a subsidy on the production of tradable goods (which is desirable), along with a tax on their domestic consumption (which is incidental and undesirable).

The economy rebounded in a double dip, W shaped recession in the second quarter, boosted by the temporary effects on consumption of 100 billion in tax rebates.

Even after the proposed doubling of the consumption tax, the rate will remain half the 20 (or more) that almost all European countries levy. Overall tax revenue is roughly 27 of GDP, putting Japan in 28th place among the 35 OECD countries.

A consumption tax hike should be timed in such a way that it does not suffocate the economic recovery that Abe s bold economic program, dubbed Abenomics, is facilitating.

The US economy, on the other hand, is bogging down in its policymakers persistent emphasis on consumption and tax cuts (most notably for the super rich) over investment.

Last year, when Japan s Diet passed the legislation to raise the consumption tax, it included a provision calling for the plan to be reevaluated if economic conditions required it.

While French public spending which stood at 56 of GDP in 2011 is at or above Scandinavian levels, French households pay lower tax rates on consumption and personal income.

CAMBRIDGE In April 2014, Japan s consumption tax rate is set to rise from 5 to 8 in an effort to address the long term problem of high public debt.