Achieving Fiscal Consolidation while Promoting Social Cohesion in Japan

Abstract

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Ensuring Fiscal Sustainability in Japan in the Context of a Shrinking and Ageing Population

“…Increasing the share of personal income that is taxed would reduce inequality. Under the current system, the tax wedge, which takes into account tax and social security paid both by workers and employers and the family benefits that workers receive in the form of cash transfers, is significantly higher than the OECD average for low-income families with children and is relatively flat across the income distribution (Jones and Fukawa, 2015). Reducing deductions would raise more tax revenue, some of which could be used to cut the tax burden on low-income households.…”