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Elderly may be given choice between pension, tax exemption

Japan Today 


TOKYO Finance Minister Masajuro Shiokawa said Wednesday the government should consider adopting a system that would give high-income elderly people the choice of receiving basic public pension benefits or an exemption of the same amount for inheritance tax.

Shiokawa unveiled his idea at a news conference after a meeting of the government's key economic panel, the Council on Economic and Fiscal Policy, which discussed measures to curb the public burden in social security earlier in the day.

Shiokawa, who did not give a clear definition of high income, said he proposed the idea as his own, not that of the Finance Ministry, to the meeting of the panel over which Prime Minister Junichiro Koizumi presides.

Shiokawa said the tax exemption can be an incentive, and the amount should be equal to the benefits that high-income elderly people forgo.

Shiokawa also told the meeting that it will be impossible to maintain the social security system under the current framework when the government burden on the system increases by around 1 trillion yen per year.

At the panel meeting, private-sector members proposed a pension reform plan for fiscal 2004 aimed at curbing the potential public burden to around 50%, economic and fiscal policy minister Heizo Takenaka said at a separate news conference.

All council members basically agreed with the direction of their proposal, but opinions differed on a number of points and more discussion is needed, Takenaka said.

The potential public burden, which is the ratio of taxes, social insurance premiums and fiscal deficit to national income, stayed at 47% in fiscal 2001.

But it is expected to climb to 61% in 2025 unless the current pension system is amended to accommodate the impact of rapid graying of the national population as well as increases in pension payments and medical expenses, according to an estimate of the Cabinet Office.

Shiokawa told reporters he proposed that the government adopt a so-called Sweden formula under which the basic public pension ensures the minimum level of life, which he said is equivalent to the levels of households that receive public assistance.

"But I suggested the government need not provide pensions to people with high incomes if they opt not to receive them," he said. "The government then should consider offering them incentives in other forms."

Shiokawa also said he told other members of the meeting that he wants them to fully review the pension system as a whole, adding the government must address the issue either by raising premiums or cutting benefits.

"I believe it will be difficult to have the government coffers cover increases in pension and medical expenditures, which are expected to increase by 8 trillion in 2010," he said.

Private-sector members argued that it is necessary to restrain the amount of pension payments, while increasing premiums as soon as possible.

After the premium rates and taxation rates are fixed, a new framework for adjusting pension payments should be introduced based on a clear rule, they said in a proposal.

In addition, the proposal calls for taxes on pension payments, which are now basically free of taxation, saying that elderly people should also bear burdens in accordance with their economic ability.

On the basic pension, the proposal in effect says housewives who are currently exempt from payments of social insurance premiums should pay them. 

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