Tax reform outline to include financial taxes

TOKYO (Jiji Press) — A financial income tax review will be noted as an important item for consideration in Japan’s fiscal 2022 tax reform outline to be approved at year-end.

The government and the ruling parties are considering launching full-scale talks on a possible hike in financial income taxes next year or later, in order to achieve Prime Minister Fumio Kishida’s wealth redistribution policy.

The maximum tax rate stands at 55% for employment income, with earners paying more tax as their income grows.

For financial income, such as from capital gains and interest, the tax rate is flat at 20%. This means that the higher the proportion of financial income in overall income, the smaller the tax rate.

In Japan, financial income accounts for a major part of total income at many wealthy households. A gross annual income of ¥100 million is considered a dividing line above which a tax burden rate starts to drop markedly.

Kishida during his campaign in the ruling Liberal Democratic Party’s presidential election in September said that he will strengthen financial taxation to reduce income disparities.

After he won the race and became prime minister in October, however, Kishida announced a postponement of discussions on the matter after his proposal was blamed for triggering a stock price fall.

Opposition parties have criticized Kishida’s sudden change of mind.

Some people believe that the government hopes to fend off the criticism by including the financial tax review in the tax reform outline.