To use this site, please disable the ad blocking feature and reload the page.
This website uses cookies to collect information about your visit for purposes such as showing you personalized ads and content, and analyzing our website traffic. By clicking “Accept all,” you will allow the use of these cookies.
Users accessing this site from EEA countries and UK are unable to view this site without your consent. We apologize for any inconvenience caused.
The income tax system, which underpins the foundation of the nation’s public finances, must not be distorted by political parties competing to win public favor. It is necessary to listen to the voices of the people and discuss what the system should look like.
Deliberation on tax reform bills to raise the “annual income barrier,” the income threshold for the imposition of income tax, from ¥1.03 million to ¥1.6 million has begun in the House of Councillors.
There are two deductions for company employees and other salaried workers: a basic deduction of ¥480,000, which is applied to all people in principle, and an employment income deduction of at least ¥550,000, which is based on annual income. For an annual income that is the total of these two deductions — ¥1.03 million — or less, no income tax is levied.
Given the persistent high prices, the household finances of low-income earners are suffering. The tax exemption threshold has remained unchanged since 1995 due to the prolonged period of deflation. In light of the recent rise in prices, it is appropriate to review the minimum tax exemption.
However, the reform bills have ended up in an awkward shape. It must be said that this is the result of bargaining over the numbers between on the one hand the ruling parties, namely the Liberal Democratic Party and Komeito, which wanted to limit the decrease in tax revenue, and on the other hand the Democratic Party for the People, which was demanding the threshold be raised to ¥1.78 million.
The reform bills stipulate expanding the tax exemption threshold to ¥1.6 million for those earning ¥2 million or less annually. For others, the basic deduction and the minimum amount of employment income deduction will each be increased by ¥100,000.
However, in consideration of high prices, those earning between ¥2 million and ¥8.5 million will come under a temporary measure for two years, and their basic deduction will be increased by a further ¥50,000 to ¥300,000, depending on annual income.
The actual tax reduction is estimated to be between ¥20,000 and ¥40,000 for single people and ¥40,000 for spouses who both work and each earn ¥4 million annually.
In order for the public to agree to pay taxes, the system must be simple and easy to understand, but the envisioned system is so complicated that people could have difficulties understanding.
The reform bills would result in a loss of tax revenue of ¥1.2 trillion. It is irresponsible that, despite Japan’s fiscal condition being the worst among developed countries, there is no prospect of a source of revenue to cover the possible shortfall.
The basic deduction is designed to guarantee the right to a minimum standard of living by not imposing tax on the minimum income needed. Changing the deduction by dividing it according to annual income categories is not in line with this principle.
Revisions to income tax will affect many. They should be carefully discussed over time. It is desirable to consider the basic exemption in conjunction with other issues such as the nature of income tax rates and revisions to other tax systems.
The DPFP, which sparked the debate by advocating an “increase in take-home pay,” ultimately did not support the reform bills, and its talks with the ruling camp collapsed. Considering the upcoming upper house election, it is lamentable that the current situation is marked by nothing but political maneuvering on the part of both the ruling and opposition parties.
