THE VAT IN JAPAN

The VAT came into being in Japan in 1988 after the struggle of three P rime Ministers. This is one of the most significant tax reforms in Jap an after the War, and this paper unveils the background and the nature of this reform. Emphasis will be put on the concessions offered by th e government to small and medium-size firms. The paper concludes that a revenue-beats-everything approach toward tax policy could eventually be very costly in terms of postponing long overdue reform of ineffici ent sectors of the economy.