Note 3-48

(48) When using a national burden ratio indicator, it is important to pay attention to the extent of the indirect tax shift and the taxation base. Take, for example, the effects of the extent of the indirect tax shift. In the case of a country where an indirect tax is not shifted to prices at all. Since the national burden ratio, as measured by the national income in factor values, does not include the indirect tax in its denominator, while its numerator includes the indirect tax, even if the tax burden is in the same amount, the tax national burden ratio will be expressed as relatively higher in the countries where the ratio of indirect tax is high. On the other hand, in the case of a country where an indirect tax is fully shifted to prices, the country's gross domestic product will increase by the amount of the indirect tax, but its national income in factor values will not be influenced. In this case, therefore, even if the tax burden is the same amount, the country's national burden ratio, as measured by gross domestic product, will tend to be expressed as relatively lower. In the case of Japan, it is reasonable to believe that its indirect tax has been shifted to prices to a considerable extent judging from the fact that the consumer price index (excluding imputed rents of owned houses and fresh vegetables) rose 2.9% in FY 1964, when the consumption tax was introduced, and rose 2.2% in FY 1997, when the consumption tax rate was raised.