Pension 'trump card' goes unplayed / System to forcibly collect unpaid premiums dormant since creation 2 years ago

The Yomiuri Shimbun

The system touted as a "trump card" for halting the decline in contributions to the government-run pension scheme has not been used since its creation two years ago, The Yomiuri Shimbun has learned.

Under the system launched in January 2010, the Japan Pension Service is allowed to delegate to the National Tax Agency its authority to forcibly collect pension premiums in serious cases of nonpayment.

Explaining why the system has not been utilized, the Health, Labor and Welfare Ministry said people often agree to pay when informed that tax authorities may forcibly take the money.

However, the number of people in arrears on their national pension premiums is still growing.

Analysts say a major factor behind the failure to use the compulsory system is likely a jurisdictional squabble between the health ministry, which oversees the JPS, and the Finance Ministry, which has the tax agency under its umbrella.

The squabble could affect the proposed launch of a Japanese internal revenue agency designed to integrate the levying of taxes and pension premiums.

The ratio of people paying their national pension premiums as required by law has plunged sharply since fiscal 1997, falling below 60 percent in fiscal 2010. As of the end of October 2011, the figure was 56 percent.

Likewise, the number of companies failing to make pension payments under the corporate employees pension plan (kosei nenkin) reached a record high of about 162,400 across the country in fiscal 2010.

The growing nonpayment among individuals and businesses is a serious threat to the sustainability of the nation's pension plans, the analysts said.

When the government disbanded the error-plagued Social Insurance Agency and replaced it with the JPS in 2010, the government decided to use the tax agency to forcibly collect pension premiums from "malicious nonpayers."

The term "malicious" refers to people who meet the following criteria:

-- Nonpayment for at least two years.

-- Yearly income of 10 million yen or more for a person covered by the national pension plan and 100 million yen or more in unpaid premiums for business operators.

-- Evidence that an individual or a business has hidden assets.

If these criteria are confirmed, the JPS can--acting through the health, labor and welfare minister--delegate its authority to seize property to the tax agency.

The health ministry initially estimated there were at least several hundred "malicious delinquents" among people covered by the national pension plan throughout the country.

However, the ministry later said many delinquents agreed to pay premiums upon hearing they could be subject to forcible collection by the tax agency.

The National Tax Agency, however, views the situation differently.

One tax agency source said there were several cases in which officials from the JPS sought advice from the tax agency about people who were chronically delinquent in their premium payments.

In most of such cases, the JPS was found to be unaware of property held by the delinquents, which the source said meant the tax agency's intervention was unnecessary.

In addition, some people deemed pension plan delinquents were found to have paid their taxes properly, meaning the nonpayers may have obeyed tax authorities but brushed off the JPS, the tax agency source said.

As a result, the system of putting the tax agency in charge of collecting pension premiums has never been used, although it was introduced as a "last resort" to raise the ratio of people who pay their pension premiums.

The idea of creating an internal revenue agency was incorporated into the Democratic Party of Japan's electoral pledge for the 2009 House of Representatives election as a way to reduce the number of delinquent payers and cut back on wasteful use of taxpayers' money.

If this idea is materialized, the National Tax Agency and the JPS will be integrated into a single entity.

However, apparently due to bureaucrats' desire to maintain the status quo at their organizations, both the tax agency and the health ministry are averse to creating the planned revenue agency, the analysts noted.

"It's hardly plausible, as the health ministry claims, that bringing up the name of the National Tax Agency gets delinquents to pay," said Kazuhiko Nishizawa, a senior researcher at the Japan Research Institute think tank and a leading expert in social security affairs.

Nishizawa added, "The truth may be that the health ministry and the tax agency worry that using the tax agency to make forcible collections would lead to establishment of the revenue agency."