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Japan to delay decision on income tax hike for defense spending
MAINICHI   | Desember 13, 2024
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Japan's Prime Minister Shigeru Ishiba, center, attends a Cabinet meeting at his office in Tokyo on Oct. 3, 2024. (Mainichi)
TOKYO (Kyodo) -- Japan's ruling parties have agreed to put off a decision on when to raise income tax to help fund a planned defense spending increase, sources close to the matter said Friday.
However, the government is expected to expand revenue from corporate and tobacco taxes starting April 2026, as part of efforts to nearly double the defense budget to 2 percent of gross domestic product, the sources said.
Prime Minister Shigeru Ishiba's Liberal Democratic Party and its junior coalition partner Komeito party are expected to include the plan in their tax reform proposals for fiscal 2025 from April.
The government has decided to allocate 43 trillion yen ($281 billion) in defense-related spending to achieve its goal of doubling the defense budget over the five years through fiscal 2027.
It aims to increase its annual tax revenue by 1 trillion yen through higher corporate, income, and tobacco levies to help cover the expanded defense expenditure.
But it has yet to finalize a timeline for the plan, having only said the additional taxation will come at an appropriate time in fiscal 2024 or later.
The LDP initially sought to introduce a new taxation item for income starting January 2027, but Komeito, a self-proclaimed "peace party" with many less-wealthy supporters, remained reluctant to accept the proposal, according to the sources.
The ruling coalition will continue to discuss when to increase income tax for defense purposes, the sources added.
During Friday's tax reform talks with an influential opposition party, the LDP and Komeito proposed to raise the tax-free income threshold from the current 1.03 million yen to 1.23 million starting next year.
The ruling parties and the Democratic Party for the People have already agreed to lift the ceiling, viewed as a factor discouraging part-time employees from working longer hours despite the country's labor shortage. But the proposed level is far below the 1.78 million yen demanded by the DPP.
Motohisa Furukawa, the DPP's acting president and chair of its research commission on the tax system, told reporters the proposal was "out of the question" and called for the level to be raised further.
The ruling coalition needs the DPP's support in parliament after losing its majority in the House of Representatives in the general election late October.
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