HIGHER REVENUES DEAL BLOW TO JAPAN TAX REFORM PLAN
Prime Minister Yasuhiro Nakasone's
diminishing hopes of overhauling the tax system have been dealt
a serious blow by reports of sharply higher than expected tax
revenues in 1986/87, government officials said.
    Nakasone has argued that the tax system must be reformed to
provide the revenue for more than 1,000 billion yen of tax cuts
promised in the government's emergency economic package last
month. But his argument has been undercut by reports that the
1986/87 tax take was as much as 2,500 billion yen more than
expected.
    That means the government should have more than enough
money in the fiscal year ending next March to pay for the
planned tax cuts without having recourse to the unpopular tax
measures proposed by Nakasone, one official said.
    The Prime Minister has proposed an indirect tax and the
abolition of tax breaks on small savings as ways of raising
revenue to offset the tax cuts.
    But stiff opposition has forced him to shelve the idea of
an indirect tax, at least for the time being. He still hopes to
gain parliamentary approval next month to abolish tax breaks on
small savings.
    The higher than expected revenues in 1986/87 partly stemmed
from increased receipts from land and securities taxes, as
prices of both shares and land soared, one official said.
    But corporate tax revenues have also been more buoyant than
expected, perhaps indicating the recession of the last year
induced by the strong yen was not as bad as thought, he said.
    The final figures for 1986/87 revenues are due to be
released by the Finance Ministry on July 1.
    The higher revenues last fiscal year have also undercut
attempts by the Finance Ministry's budget bureau to reduce
investment spending by government departments in the 1988/89
budget, several officials said.
    A budget bureau official said the bureau still wanted to
stick with its so-called "minus-ceiling" policy, which calls for
government departments to reduce investment spending by five
pct a year.
    But he acknowledged this would be difficult, given the
sharp increase in revenues last fiscal year and heavy domestic
and U.S. Pressure on the ministry to stimulate the economy.
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