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Tax accord saves face for Aso, New Komeito
An ambiguously worded agreement reached Tuesday between the ruling parties over a medium-term tax reform plan was a compromise to ensure that neither Prime Minister Taro Aso nor New Komeito would lose face in their respective arguments about a possible consumption tax hike.
The two ruling parties' weeklong negotiations to revise the medium-term program stipulates that the consumption tax rate will be raised in fiscal 2011 in line with Aso's pledge, but also states that economic recovery is a prerequisite that must be met in raising the rate. The latter provision is obviously designed to help accommodate the wishes of New Komeito, which has been cool on the tax increase.
However, the dispute between the two parties could be rekindled, given that the prime minister overrode New Komeito's opposition by tenaciously insisting that the accord state the tax rate be raised in fiscal 2011.