Tax revenue on track to 17-year high
TOKYO -- The Japanese government is likely to collect the most revenue through taxes in 17 years this fiscal year, but the extra money will provide little relief from chronic budget strain.
General-account tax receipts are expected to total around 51.5 trillion yen ($438 billion), the most since fiscal 1997's 53.9 trillion yen take.
That is about 1.5 trillion yen more than the government forecast last December, with the additional flows mostly from taxes on personal income and corporate profits.
But strip away the 4.5 trillion yen in extra revenue generated by raising the consumption tax in April, and overall tax receipts are likely to remain little changed from last fiscal year's 47 trillion yen.
Through September, income tax receipts totaled 6.8 trillion yen, coming in at a 6.6% faster pace than last year. Many Japanese are taking home more pay, at least in nominal terms. Nine out of 10 big companies listed on the Tokyo Stock Exchange's first section and around two-thirds of small and midsize enterprises have given their workers raises, a survey by the Ministry of Economy, Trade and Industry found.
Corporate tax receipts are also likely to surprise to the upside. Pretax profits at listed companies are likely to approach a level last seen in the year ended March 2008, before the global financial crisis.
But not all growth in corporate earnings translates into higher tax receipts. That is because companies pay hardly any tax on dividend income from overseas units, which has been particularly healthy, given the yen's weakness against the dollar.
The Ministry of Finance has begun revising its tax revenue outlook this month, with an eye to drafting a supplementary budget for the current fiscal year. Part of the funding for this economic stimulus package would come from revenue exceeding the ministry's initial forecast. Proposals include a new type of grant that local authorities can use in ways they see fit, such as helping low-income households pay for kerosene. In all, the government is expected to cobble together at least 3 trillion yen for the extra budget.
After two straight quarters of negative growth, Prime Minister Shinzo Abe has decided to postpone a second consumption tax hike set for next October. This 18-month delay would erase an estimated 1.5 trillion yen of fiscal 2015 revenue.
Achieving a goal of halving Japan's primary balance from fiscal 2010 to fiscal 2015 will require higher revenue. And some measure of spending control will need to be imposed at the initial stage of budget drafting, says Masahiro Nishikawa at Goldman Sachs Japan.