Govt, ruling bloc mulling tax break on wage hikes for all employees

Jiji Press

November 25, 2021

TOKYO (Jiji Press) — The government and ruling camp are considering requiring companies to raise the salaries of all employees, including new and nonregular workers, to qualify for a tax break for wage-raising firms, it was learned Thursday.

The tax break requirement is expected to be included in tax system reform measures for fiscal 2022, the discussion for which is slated to begin in earnest from Friday, and in an outline of such measures to be released in early December.

The tax break system for companies raising employees’ wages was established in fiscal 2013.

Prime Minister Fumio Kishida plans to drastically review the system as part of his strategy for promoting wealth distribution.

Under the current system, a company that conducts a certain level of wage hikes is eligible for a deduction of around 15% of the wages it pays from the final tax amount.

Additional deductions are available for firms that increase their spending on training from the previous fiscal year.

As a result, major firms can be eligible for tax cuts of up to 20% and small firms for cuts of up to 25%

Komeito, the junior partner in the ruling coalition with the Liberal Democratic Party, is calling for up to 30 pct in tax deductions under the revised system.

Yoichi Miyazawa, tax policy chief of the LDP, is seeking to limit the tax benefits to when firms raise base wages, while the business world is urging a tax break for hikes in total wages paid, including bonuses.