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Ministry of Finance
How will coronavirus impact 2020 tax revenues?

Fears have surfaced in the Ministry of Finance that, due to the domestic recession brought on by the Covid-19 pandemic, tax revenues for FY2020 will need to be adjusted downwards. Corporate, personal, and consumption taxes are expected to decline. A drop in spending means hopes for increased revenue from last October’s consumption tax hike are fading. Projections had already been adjusted down due to the US–China trade friction and natural disasters of 2019, raising the specter of two difficult years in a row.

Tax revenues for the 2020 fiscal year had been expected to rise by about ¥1 trillion over 2019 figures to ¥63.5 trillion. But this presumed gross domestic product growth of 1.4 percent. Those figures considerably exceed the 0.5-percent growth projected by the pri­vate sector, and analysts have voiced skepticism.

Moreover, the actual GDP for the final quar­ter of 2019, released by the Cabinet Office in February, showed a decline from the previous quarter of 1.6 percent. This was blamed largely on the poor performance of export-dependent manufacturers affected by US–China trade fric­tion and the consump­tion tax increase, which put a damper on spending. “So, the coronavirus is truly like bees stinging a crying face,” said a ministry bureaucrat, using a Japanese expression meaning to go from bad to worse.

In the initial estimate for FY2020 tax revenues, an unprecedented increase of ¥21.719 trillion over the previous fiscal year had been expected. But if the economy is hit by the double whammy of Covid-19 and a drop in consumption tax revenue, no major growth can be expected.

On February 28, the Daiwa Institute of Research released an estimate that, due to the coronavirus, individual consumption during the four months from February to May would drop by ¥3.8 trillion—considerably more than the ¥2.6 trillion following the Great East Japan Earthquake and Tsunami of March 11, 2011. A Ministry of  Economy, Trade and Industry bureaucrat remarked, “There are no circum­stances that give cause for optimism.”

Financial Services Agency
Will My Number and bank account linking be made mandatory?

The government has continued its deliber­ations on a system that would require the linking of financial accounts with each citizen’s 12-digit ID, called My Number. Following a cabinet meeting on January 17, it came out that Minister of Internal Affairs and Communications Sanae Takaichi had requested that the Ministry of Finance and the Financial Services Agency (FSA) consider such a move. The government had been planning to issue concrete guidelines during 2020, ahead of enacting revisions in the relevant law that would provide for a unified number system.

Takaichi explained the need for such as system based on personal experience: “When a parent passes away, in some cases, the family must endure difficulties because they don’t know where the accounts were held, or they are unable to locate the bank passbooks. There were cases at the time of the Great East Japan Earthquake and Tsunami when account passbooks were washed away, and people didn’t know where the accounts were.”

In response to a reporter’s question as to whether linking should be mandatory, Minister of Finance and Deputy Prime Minister Taro Aso said: “With the diffusion of information technology, the My Number card ought to be usable in various ways, for example as a credit card, a substitute for a health insurance card, or for storing residential registration details. I’d defi­­nitely like to elicit people’s cooperation to accomplish this.”

The FSA, however, flew off the handle, with one senior bureaucrat complaining: “Takaichi’s remarks were made without any grassroots lobbying. Under the present system, a depositor must give their consent when allowing a personal account to be linked to My Number.”

Another bureaucrat at the FSA pointed out: “Without any clear benefits, people will just interpret the government’s rationale to mean it’s aimed at facilitating collection of taxes.”

In 2018, securities account registrations were linked to My Number, but as nearly everyone in the country has a bank account the proposed requirement is more complex. For the law to be revised during the regular session of the Diet next year, it will be neces­sary to indicate a clear direction and engage the public by this fall.

keizaikai magazine