Japanese government plans to cut income tax by 30,000 yen and resident tax by 10,000 yen in June next year.
Jamin and Gongmyeong begin discussions on system design for fixed-rate tax cuts starting today
Within the government, there is also an opinion to exclude tax cuts for the ‘top 5%’ or ‘annual salary exceeding 20 million yen’.
The Nippon Keizai Shimbun reported on the 27th that Japanese Prime Minister Fumio Kishida expressed his intention to postpone the start of tax increases next year to finance the increase in defense spending.
Prime Minister Kishida stated at the Budget Committee of the House of Representatives on this day, “This is not an environment in which it can be implemented from 2024,” and “It will not be implemented at the same time as the flat-rate tax cut (of income tax).”
The fixed tax cut is to reduce per capita income tax by 30,000 yen and resident tax by 10,000 yen in 2024.
Prime Minister Kishida also explained the timing of the tax increase to increase defense spending, saying, “The timing of implementation will be judged based on the economy and wage increase trends under the framework of gradually implementing it over several years toward 2027.”
Regarding the 70,000 yen (per household) paid to households exempt from resident tax as a return measure due to increased tax revenue, he said, “We will pay it quickly to those who are suffering in difficult situations.” The Yomiuri Shimbun reported that the Japanese government is considering payment within the year.
Regarding concerns that the fiscal situation will worsen due to tax cuts, he said, “Eviction from deflation is the most important thing for fiscal reconstruction. “We must completely avoid deflation by cutting income taxes,” he said.
Koichi Hagiuda, chairman of the Liberal Democratic Party’s Jeongjo Committee, also argued at the Budget Committee meeting on the same day that it would be difficult for the public to understand raising taxes when considering future tax cuts, and said of Prime Minister Kishida’s remarks, “I take this as a judgment that there will not be a defense tax increase next year.”
Previously, the Japanese government decided at the Cabinet meeting at the end of last year to invest a total of 43.5 trillion yen (about 400 trillion won) in defense spending over the five years from 2023 to 2027 as a measure to fundamentally strengthen its defense capabilities.
In this regard, Prime Minister Kishida instructed the Ministry of Defense to take measures to increase the budget related to defense expenses to 2% of gross domestic product (GDP) by fiscal year 2027 (April 2027 to March 2028).
Some have speculated that Prime Minister Kishida may be considering military provocations from China and North Korea and is planning to increase taxes to increase defense spending starting next year.
When criticism was raised that there was a contradiction in Prime Minister Kishida’s order to the ruling party to consider an income tax cut, and an increase in income tax to secure funding for increased defense spending, Finance Minister Shunichi Suzuki said at a press conference on the 20th, “It is a contradiction because the perspectives are different. “It won’t work,” he countered.
Regarding the income tax cut that Prime Minister Kishida ordered to be reviewed, Finance Minister Suzuki pointed out that it was only a temporary measure as a “measure from the perspective of protecting the lives of the people due to the recent surge in prices,” and that the increase in defense spending was related to national security and national security. We prepared for this to be a permanent measure.
Meanwhile, the Jiji News Agency reported that the tax research committees of the Liberal Democratic Party and the Communist Party held an informal executive meeting on the 27th and began reviewing specific plans for income tax reduction for the 2024 tax system revision.
The Liberal Democratic Party and Komeito are discussing system design so that the flat tax cut of 40,000 yen per person ordered by Prime Minister Kishida can be implemented in June next year. The news agency pointed out that the reduction of tax cuts is expected to become a talking point.
The Japanese government plans to reduce income tax by a flat rate of 30,000 yen and resident tax by 10,000 yen. The financial resources needed for a series of tax cuts amount to approximately 3.5 trillion yen, equivalent to the tax increases over the past two years.
Prime Minister Kishida repeatedly emphasized at the Budget Committee of the House of Representatives on the 27th, “We will reduce the amount in the form of income tax and resident tax so that the people can find strength in the face of high inflation.”
Contrary to Prime Minister Kishida’s policy of granting benefits to those subject to tax cuts regardless of income, the news agency reported that within the Liberal Democratic Party, there are many proposals to exclude the ‘top 5%’ or ‘annual income exceeding 20 million yen’ from tax cuts.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.