2.3m salaried workers to face income tax hikes

December 13, 2017

Tokyo- Japan's ruling Liberal Democratic Party and its coalition partner, Komeito, adopted on Tuesday an income tax reform plan that will bring about heavier burdens on salaried employees earning over 8.5 million yen a year.

About 4 pct of all salaried workers in Japan, or some 2.3 million people, would face increases in income tax payments. The step will be put into place in January 2020.

The income tax reform has been the biggest issue in the fiscal 2018 tax system overhaul. Now that the matter has been settled, the ruling bloc is poised to compile on Thursday its tax reform package for the year starting next April.

Under the income tax revamp, the amount of basic deductions will be raised by 100,000 yen, while that of additional income deductions for salaried workers will be cut by 100,000 yen. The maximum income deduction amount will be lowered to 1.95 million yen from the current 2.2 million yen.

Corporate employees who have children aged up to 22 or family members in need of nursing care will be exempted from the tax hike even if they earn over 8.5 million yen a year. The number of such people will total about two million.

Basic deductions will be increased for people whose annual incomes stand at 24 million yen or less, while being cut in stages for those with incomes topping the level. People earning more than 25 million yen annually will take no basic deductions.

Annual income tax payments will increase by some 15,000 yen for salaried employees earning 9 million yen a year, by about 30,000 yen for those with incomes of 9.5 million yen and by 45,000 yen for those getting 10 million yen.

Senior LDP and Komeito officials initially considered a reform plan that would raise income tax burdens for corporate workers with more than 8 million yen of annual income. But many Komeito officials complained about the plan, saying that it would hit middle-class families hard.

The finalized reform plan includes a cut of up to 200,000 yen in the amount of deductions for public pension recipients whose incomes other than pension benefits exceed 10 million yen. Furthermore, a ceiling on deductions will be set for pensioners whose benefits top 10 million yen.

At the Tuesday meeting, the two parties also finalized other key plans, including a tobacco tax hike, corporate tax cuts for companies raising wages, and the establishment of a forest preservation tax. Jiji Press