Ruling parties decide on tax reform plan

The Yomiuri Shimbun

15:32 JST, December 16, 2022

The Liberal Democratic Party and its ruling coalition partner Komeito decided Friday on a fiscal 2023 tax reform outline that specifies increases in three taxes — corporate, income and tobacco — to secure a source of funding to beef up the nation’s defense capabilities.

The specific timing of the hikes will be decided later.

To fund a planned increase in defense spending, the existing corporate tax rate will be maintained but a surtax of about 4% to 4.5% will be introduced. In consideration of small and medium-sized enterprises, however, the surtax will not be imposed for companies whose cooperate tax is less than ¥5 million, which is equivalent to ¥24 million in terms of corporate income.

Regarding income tax, a surtax of 1% will be added to the tax amount, while an existing special income tax for reconstruction — currently a 2.1% time-limited surtax set to run until 2037 — will be lowered to 1.1% to ease the burden during the remaining period of its existence. However, that period will be extended beyond 2037.

The tobacco tax will be raised in stages by a total of ¥3 per cigarette.

The outline stipulates that the timing of the tax hikes will be set at “an appropriate time after 2024.”

Given strong opposition to tax hikes even within the LDP, the ruling parties have decided to continue discussions without indicating definite dates for the hikes, but will implement them “in stages over multiple years” in order to secure annual financial resources of over ¥1 trillion in 2027.

The outline also includes expansion of the Nippon Individual Savings Account (NISA) investment and measures to foster startups.