The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Efficiency, equity (fairness), and simplicity are three key words in characterizing the principles of proposed tax reforms in many countries. The internationalization of the financial market through capital mobility among the industrial countries is a recent phenomenon and it is possible that the effect of domestic tax reform is dictated by international capital flows. The purpose of this paper is to examine whether the tax reform proposed recently in Japan satisfies the above principles, in particular, efficiency and equity, and to investigate the effects not only on the real economy in Japan, but also on capital outflows from Japan to abroad. Also, the aging problem is examined briefly.