Kishida Pledges Tax Increase Postponement at Meeting; Appears to Complement Recent Income Tax Cut Pledge

The Yomiuri Shimbun

15:02 JST, October 28, 2023

Prime Minister Fumio Kishida expressed his intention to postpone the government policy of increasing income and other taxes as a measure to secure financial resources to strengthen the nation’s defense capabilities. The policy was originally planned to be implemented next fiscal year during a meeting of the House of Representatives’ Budget Committee on Friday.

The prime minister’s plan appears to show consistency with his recent pledge to return to the people a portion of increased tax revenues that exceeded initial projections in the form of fix-amount cuts in income and other taxes.

“The current circumstances do not allow us to implement [tax hikes]. They will not be implemented at the same time as the fix-amount tax cuts,” Kishida said at the Friday session of the committee.

The prime minister did not indicate when the tax increases would now take place, only saying, “It will be determined based on such factors as economic conditions and wage increases.”

Late last year, the government decided to increase corporate, income and tobacco taxes “at an appropriate time in or after 2024” as part of the fiscal resources required to enhance defense capabilities. If securing stable fiscal resources is delayed, the government will have to depend on the issuance of government bonds, possibly leading to a loosening in fiscal discipline.

As a way to return to the people a portion of increased tax revenues, the government is considering ¥40,000 cuts in income and residential taxes in June next year. To this end, Kishida said, “The public is suffering from soaring prices and the people’s livelihood must be protected.”

Based on the prime minister’s intention, the Liberal Democratic Party’s Research Commission on the Tax System and the LDP’s junior coalition partner Komeito’s counterpart commission held an unofficial meeting of senior commission members to launch discussions for tax system reforms for next fiscal year. The parties’ organizations will discuss institutional designs for such matters as the fixed-amount cuts in the tax system.