Analysis On The Impact Of Consumption Tax To Japanese Economy Growth

Since the burst of early 1990s economic bubble, Japan’s economy developed slowly. The direct-tax based tax system restricted the growth of Japan’s fiscal revenue. To get rid of the fiscal difficulty, Japanese government has been gradually implementing tax reforms to reduce the direct-tax level, and increase consumption tax to increase revenue. Japan’s consumption tax is the imposed excise tax in general sense, Le., all final consumer goods and consumer behaviors are the object of taxation and are implemented the same tax rate. On the one hand, the direct effect on producers and consumers affect investment and consumer behavior so as to affecting economic growth. On the other hand, it can regulate the allocation of resources and economic operation by governmental public expenditure, so as to play indirect effects on the economy increase. In order to explore the effects and extent of Japan’s consumption tax increase on the economy, we carry out the systematic analysis theoretically and empirically to make realistic judgments and meanwhile make useful recommendations for the financial rationalization in China.First, we analyze the reasons for Japan’s consumption tax increase. Long-term economic downturn resulting in reduced tax revenue, large treasury scale causing heavy debt burden, low birthrate and population aging intensifying financial burden, all these situation prompted Japan to reform the tax system. Secondly, combining with the economic growth theory and the role of taxation on economic growth, we analyzed the effect of Japanese consumption tax increase on economic growth by using mathematical and quantitative method. The conclusions show that:consumption is suppressed due to the rising price level and other factors at the beginning of the consumption tax increase; however in the long term, consumption tax raise can support the investment of the government pension, health care, infrastructure and others, axis helpful to the economic growth. Hence, consumption tax revenue and economic growth can promote each other in a positive correlation Finally, the author analyzed the problem of aging and the economic situation in China, put forward the lessons and suggestions from Japan’s consumption tax reform for the Chine sere form of taxation system.