tax notes international - Tuck School of Business - Dartmouth College

JAPAN
insistence that the bill include a hard and fast commitment
to raise the consumption tax in fiscal 2011, and
those who supported Aso’s position. The clause also
stresses the need for Tokyo to promote administrative
reform and to deal with wasteful expenditures — important
points for many LDP members who opposed
the initial 2011-specific wording. With an election
looming later this year, Aso reportedly wants to avoid
creating tension within his party.
The LDP needs to receive a two-thirds majority in
the powerful lower house of the Diet to have any
hopes of passing budget-related bills that may be rejected
by the opposition Democratic Party of Japan
(DPJ), the majority party in the upper house.
The revised clause states that the actual date for increasing
the tax rate will be specified in a separate bill,
but that all necessary legal preparations will be put in
place by fiscal 2011, which would enable the government
to implement the tax increase and other related
tax reforms as soon as a date is agreed upon.
By revising the supplementary clause the Cabinet
has aligned itself with the LDP’s Treasury and Finance
Division and its Policy Deliberation Committee, both
of which reportedly gave their approval a day earlier.
The party’s General Council also signaled its backing
of the implementation legislation, including the supplementary
clause, on January 23. The 2009 budget proposal
was presented to the Diet on January 19.
Some LDP lawmakers continue to harbor concerns.
‘‘The wording is still ambiguous. Prime Minister Aso
has a responsibility to give a full account of the plan,’’
said Kenichi Mizuno, an LDP member of the House
of Representatives (lower house), according to a January
22 Kyodo News report.
‘‘I find it acceptable if the government would
specify the rate increase and the specific date in separate
legislation,’’ added Ichita Yamamoto, an LDP
member of the House of Councillors (upper house)
who had previously opposed the clause. However,
Yamamoto told reporters that ‘‘it is impossible to raise
the consumption tax in fiscal 2011.’’ The Japanese fiscal
year runs April 1 to March 30.
Not surprisingly, the opposition DPJ was quick to
condemn the consumption tax clause. At a January 23
press conference in Tokyo, DPJ acting President Naoto
Kan said the clause ‘‘has highlighted Prime Minister
Aso’s flip-flop on another important issue.’’ Kan apparently
was alluding to Aso’s indecision about whether
high-income individuals should accept cash payments
from Tokyo as part of the government’s overall stimulus
plan. Aso initially suggested that high-income individuals
should not accept any of the ¥2 trillion (about
$22.5 billion) dispersal, but he reportedly changed his
mind, later saying that everyone should use the money
to stimulate the economy.
LDP supporters defended Aso at various Tokyo
press conferences on January 23. In one conference,
Chief Cabinet Secretary Takeo Kawamura downplayed
the possibility that LDP members will still oppose the
bill when it comes up for vote in the Diet and denied
that the wording indicates a retreat from Aso’s original
position. ‘‘The policy presented remains the same,’’ he
told reporters.
Aso now hopes to build support among the Japanese
public for an eventual consumption tax increase.
He reportedly has assigned Akira Amati, state minister
in charge of administrative reform, to draw up a plan
that will address needed administrative reforms, spotlight
wasteful spending, and suggest ways to make the
public servant system more efficient. All of those steps
are reflected in the supplementary clause as steps to be
taken before resorting to a consumption tax increase.
Aso’s approval rating has plummeted recently to
below 20 percent, partly as a result of rising unemployment
and falling wages. His decreasing popularity
raises the threat of an LDP defeat in the general elections,
which are to be held by September.
Multinational
♦ Randall Jackson, Tax Analysts.
E-mail: rjackson@tax.org
IASB Rejects Proposal to Allow
Discounting of Current Tax in IAS 12
The International Accounting Standards Board
January 23 voted against a proposal included in a ballot
draft of an exposure document of amendments to
International Accounting Standard No. 12, ‘‘Income
Taxes,’’ that would broadly allow for the discounting of
a company’s current tax assets and liabilities.
At its board meeting in London, the IASB also decided
to ‘‘stay silent’’ and not include any discussion
on the discounting of current tax in the forthcoming
exposure draft. The board members agreed there is no
need to mention a specific requirement in IAS 12 because
a company can use existing accounting literature
during rare circumstances when a discount could apply
because of a government agreement.
IASB member James Leisenring objected to the ballot
draft’s proposal, but noted that discounting of current
tax can depend on circumstances, such as when
there are taxes that are owed but for which a settlement
can be reached with a revenue service. He added
that he had no problem with a company discounting
that tax amount.
IASB member Robert Garnett added that in practice
large accounting firms discount current taxes when
there has been an agreement with a government that
falls outside the normal tax code for deferred payment.
400 • FEBRUARY 2, 2009 TAX NOTES INTERNATIONAL
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