Ruling bloc tax chiefs agree on income tax reform

December 11, 2017

Tokyo- The tax policy chiefs of Japan's ruling Liberal Democratic Party and its coalition partner, Komeito, agreed on a plan on Monday to raise income tax for corporate employees earning over 8.5 million yen annually, starting in January 2020.

The agreement was reached in a meeting between Yoichi Miyazawa, chairman of the LDP's Research Commission on the Tax System, and his Komeito counterpart, Tetsuo Saito. The income threshold for the tax increase was raised from the previously proposed 8 million yen.

Once the two parties give final approval to the plan, the ruling coalition will include it in its annual tax system reform package, expected to be adopted on Thursday, informed sources said.

The agreement calls for increasing the amount of basic deductions from taxable income for all taxpayers by 100,000 yen, while reducing the amount of additional deductions for salaried workers by 100,000 yen.

Under the agreement, the maximum amount of salary income deductions will be lowered to 1.95 million yen from the current 2.2 million yen.

The reform is expected to increase annual income tax by some 15,000 yen for corporate workers with annual incomes of 9 million yen, by about 30,000 yen for those earning 9.5 million yen and by around 45,000 yen for those getting 10 million yen.

Households with children aged 22 or younger or with family members in need of nursing care will avoid the tax increase.

Income tax will be lowered for self-employed and freelance workers who are not eligible for salary income deductions.

The income tax reform is projected to increase the government's annual tax revenues by 90 billion yen.

The LDP previously agreed on the lower income threshold of 8 million yen for the tax increase, but Komeito opposed the plan, claiming that it would hit middle-class workers hard. Jiji Press