Japan to Review Income Tax System for Asset-Building after Retirement

October 11, 2018

Tokyo- Kicking off discussions on tax system reforms for fiscal 2019 on Wednesday, a key Japanese government panel agreed to proceed with a review of the country's income tax system to support post-retirement asset-building.

The Tax Commission, which advises the prime minister, will aim to compile its opinions on the reforms as early as in mid-November.

Under the current income tax law, people who work for the same companies for over 20 consecutive years receive larger deductions for retirement allowances than those who change jobs frequently, leading many government and ruling bloc officials to believe that the law does not meet workers' needs amid diversifying work styles.

"Tax support measures differ according to work styles," including the length of continuing service at the same companies, Minoru Nakazato, chairman of the commission, noted at a press conference after its plenary meeting on the day. "We need to discuss the matter in detail," he said.

At the meeting, members of the commission also discussed how to prepare an environment to promote electronic tax payments, including via smartphones.

Officials from the Finance Ministry and the Internal Affairs and Communications Ministry explained specific measures, including the start of smartphone-based tax filings in January 2019.

Almost all members cited the importance of raising the consumption tax rate to 10 pct from the current 8 pct in October next year as planned while showing concern about a decline in demand in line with the hike.

But Nakazato said the issue will not be discussed by the Tax Commission because the tax hike has been decided under related legislation.

Measures to cushion the impacts of the tax hike are expected to be discussed by the tax panels of the ruling Liberal Democratic Party and its Komeito ally from later this year. The focal issues will likely include tax breaks for automobile and home purchases. Jiji Press