LDP mulling corporate, income tax hikes to fund defense budget increase

The Yomiuri Shimbun

13:56 JST, October 15, 2022

Yoichi Miyazawa, the chairperson of the Liberal Democratic Party’s Research Commission on the Tax System, hinted in a recent interview that the LDP would consider raising corporate and income taxes to fund an increase in defense spending.

“It is only natural to secure a permanent source of revenue,” Miyazawa told the Yomiuri Shimbun on Friday.

The government aims to increase defense-related expenditures to 2% of gross domestic product amid Japan’s worsening security environment.

Ahead of discussions on tax code revision for fiscal 2023, Miyazawa explained that a review of spending would be a prerequisite. “We should have a thorough discussion on low-priority spending,” he said.

“Not many taxes can be expected to generate large tax revenues,” he added hinting that discussions would focus on core taxes such as corporate tax and income tax.

“It is a question of how much tax burden the people are willing to bear for their own safety and security,” he said, stressing the need for clear explanations if taxes are raised.

Regarding the lower tax burden for people with annual incomes of ¥100 million and above, he said, “We must discuss whether people with lower tax burdens should pay more.”

Under the current system, tax on income such as stock dividends and gains from share sales are low so wealthy taxpayers who receive such income bear a lower tax burden.

Securing financial resources for defense expenditures will be the focal point of the tax revisions.

Kazuo Kitagawa, Vice Representative of Komeito, said “Even if government bonds are used for the time being, it is essential to clarify a permanent source of financial resources for defense expenditures.”