Goldman Sachs Japan Economics Analyst: Exploring the Funding Sources for Tax Cuts
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Key Views
- Figure 1 provides a breakdown of central government non-tax revenue, showing that the surplus generated from foreign exchange reserves—mainly interest income—accounts for roughly half of non-tax revenue, making it a notable component of government receipts outside the tax system.
- Figure 2 examines the impact of a refundable tax credit, a permanent measure, on the public debt-to-GDP ratio. The chart indicates that even when annual revenue losses are relatively small, the refundable tax credit still has an impact on the ratio.
Outlook
Together, the charts frame two questions for Japan's fiscal policy debate: which non-tax resources, such as the surplus from foreign exchange reserves, could help fund tax cuts, and how permanent measures, including refundable tax credits, would shape public debt dynamics.
Key exhibits
Exhibit 1
Exhibit 2
Exhibit 3
