Mon, May 27, 2002 - Page 17 News List

Official suggests pay cuts

BLOOMBERG , TOKYO

Public employees may have to take a pay cut to show Japan is serious about reducing state and local government spending so that it can afford to lower tax rates, Economic and Fiscal Policy Minister Heizo Takenaka said.

"I want to reduce taxes. But we have to avoid falling into the red," Takenaka said on Asahi National Broadcasting Co's television program "Sunday Project."

"By cutting the salaries of government officials, we can cut spending," he said. "We must cut spending. This will have a knock-on effect on smaller governments too.

"Nobody wants to pay taxes. So when the government talks about cutting taxes, it's natural that people will ask, is it something the government is going to do properly or is it just putting on a show?"

Cutting government officials' salaries is one way to show Prime Minister Junichiro Koizumi's administration is serious about reducing expenditure, he said.

The government is currently discussing reforms to the tax system. Koizumi's economic panel wants personal and corporate taxes to be cut to help pull the world's second largest economy out of recession and says Japan should stop its borrowing binge that's expected to push the national debt to ?693 trillion (US$5.52 trillion), or 1.4 times gross domestic product, by March.

"The tax panel hasn't said anything about the decline in tax revenue from a tax reduction," Takenaka pointed out.

For this fiscal year, which started April 1, tax revenue may fall to a 14-year low of ?46.8 trillion yen, according to the ministry of finance.

Takenaka said that the government won't issue more bonds, instead stimulating the economy "through broad measures."

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