NRI Papers
No.57   November 1, 2002
  Tasks Facing the Taxation System in the Era of an Expanding Knowledge Economy and Increasing Longevity  
Masatoshi KURATANI
        This paper overviews the tasks facing Japan's taxation system in the era of an expanding knowledge economy and increasing longevity. This analysis includes two basic prescriptions: (1) creating an environment in which individuals and companies can take an active approach to investment aimed at accumulating "intellectual property, organizational capital and human capital," and (2) encouraging individuals to adopt a forward-looking approach in making various choices and investments that are consistent with a comprehensive view of their longer life spans.
    Specifically, the focus will be on five tasks: creating a taxation system that promotes research and development (R&D), examining innovation and taxes on companies, strengthening the creation of human capital, rethinking family and gift and inheritance taxes, and reforming the public and private pension schemes and the taxation system. In examining these five tasks, various economic models will be established with respect to the behavior of individuals and companies, and careful consideration will be given to the changes that take place in response to various tax levies. We will discuss an appropriate taxation system for this new environment on the basis of these studies.
    Tax reform is a difficult undertaking. There are a host of reasons that account for this--chief among which are the following: (1) it is often impossible to reach a consensus even with respect to purely academic and technical discussions on the effects of various tax levies; (2) as the subject of taxation often carries with it considerable income-redistribution baggage, reform proposals invariably trigger arguments over trade-offs between competing interest groups; and (3) reforms are necessarily restricted by the need to secure reliable sources of tax revenues. The experience of tax reforms in the United States and Germany amply highlighted these hurdles, and recent discussions on tax reform in Japan indicate that similar difficulties can be expected in this country as well. As the achievements and well-considered ideas of specialists are important in examining tax reform proposals, however, it is hoped that academic and technical research drawing from the current thinking of professionals in this era can be accumulated in developing innovative and constructive reform proposals.
Contents
I Examining the Tax Base as the First Step
II Various Factors Making Tax Reform Difficult
1 Understanding Tax Problems
2 Implementation of Tax Reforms
III Taxation Systems in the United States, Germany and Japan
1 Discussions on Taxation after the Regan Tax Reform in the United States
2 Background to GermanyÇfs Tax Reform Impasse in the 1990s
3 Principles of the Shoup Recommendations and Changes in Japan's Taxation System
IV Tax-Related Tasks under the Current of the Times
1 Tax System Designed to Promote Research and Development
2 Innovation and Taxes on Companies
3 Enhancement of Human Capital Formation
4 Intra-Family Gift and Inheritance Taxes
5 Public and Corporate Pension Reforms and the Tax System
V Relationship with Recent Discussions on Tax Reform

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