used for redistributional considerations. For this purpose, the tax burdens on
wealth and capital transfers (e.g. gift and inheritance taxes, property tax,
landholding tax, etc.) should have been increased more heavily than in the
Takeshita tax plan. A response to this criticism was the introduction of the
land value tax as a new landholding tax in 1992 as noted above.

There is widespread criticism that the heavier use of consumption taxes is
regressive by nature; that is, the poor thereby pay relatively more of their
income in taxes than the rich. If we follow this reasoning, the basic direc-
tion of recent tax reforms cannot be supported on the grounds that dis-
tributional equity can be achieved only by means of a progressive income tax.
However, the problem of regressive tax burdens stemming from consumption
taxes can substantially be resolved by combining two other approaches.

The first of these is designed to establish overall progressivity of the tax
system by changes in the structure of tax sources, placing heavier burdens on
wealth and capital transfers as well as creating a broad-based indirect tax. In
addition, base-broadening measures in the individual income tax must be
used to this end. The second approach is directed towards obtaining greater
distributional equity via the expenditure side of government budgets, in
particular, by means of welfare benefits to individuals with low incomes. A
combination of these two approaches might achieve better results than a
steeply progressive income tax. The reason for preferring such a combination
to the existing heavy reliance on a progressive income tax is that the former
measures can be implemented in such a way to improve distributional effects
and neutrality. The proposed tax mix should thus be further biased towards
taxes on consumption and wealth, although there is no way of attaining an
ideal combination of these three sources.

Aoki T. ( 1988), "'Tax Reform in Japan'", Bulletin for International Fiscal Documenta-
tion, March.

Ishi H. ( 1982), "'Causes and Cures of Tax Shortfalls'", Economic Eye, 3 (Sept.).

----- ( 1986a), "'Overview of Fiscal Deficits in Japan with Special Reference to the Fiscal
Policy Debate'", Hitosubashi Journal of Economics, 27 (Dec.).

----- ( 1986b), "'Moving toward Tax Reform'", Sumitomo Quarterly (Spring).

----- ( 1988), "'Tax Reform: The Takeshita Bill--Changes in Store'", Look Japan, 34
(Oct.).

----- ( 1993), The Japanese Tax System, 2nd edn., Oxford University Press.

Ishi H., and Ihori H. ( 1992), 'How Have Fiscal Deficits been Reduced in Japan?',
paper presented to the Tokyo Conference of International Seminar in Public
Economics, 31 Aug-1 Sept.

Ito T. ( 1992), The Japanese Economy, MIT Press, Cambridge, Mass.

Jichi Sogo Centre ( 1983), ( 1988), ( 1992). Local Public Finance in Japan, March.

Ministry of Finance, Tax Bureau ( 1977a, 1986, 1987, 1991, 1994), Tax Bureau, An
Outline of Japanese Taxes, Tokyo.

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