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The Yomiuri Shimbun Yoichi Miyazawa, right, chairperson of the Liberal Democratic Party’s Research Commission on the Tax System, speaks at a press conference in Tokyo on Friday.
The Yomiuri Shimbun
12:25 JST, December 21, 2024
TOKYO (Jiji Press) — Japan’s ruling camp on Friday adopted its fiscal 2025 tax system reform package featuring a plan to raise the minimum taxable income from the current ¥1.03 million per year to ¥1.23 million, the level proposed by the coalition to the opposition Democratic Party for the People.
The DPFP, which boosted the number of its seats on the House of Representatives in the Oct. 27 general election, has been seeking the threshold hike to ¥1.78 million. The secretaries-general of the ruling Liberal Democratic Party, its coalition partner Komeito and the DPFP have compiled a document in which they agreed to aim for raising the threshold to the level demanded by the opposition party.
But talks among the three parties’ tax panel chiefs fell apart as the DPFP side rejected the coalition-proposed hike to ¥1.23 million.
The tax reform package includes the agreement among the secretaries-general and a pledge that the LDP-Komeito pair, which lost its lower house majority in the general election, will “sincerely continue” discussions with the DPFP on the matter.
At a meeting Friday, the LDP, Komeito and DPFP secretaries general confirmed that the three parties will “continue to hold debates in good faith among their officials involved.”
The parties are expected to consider ways to deal with the situation, including amending tax system reform legislation to be submitted to next year’s ordinary session of parliament to be convened in January.
Under the package, the ¥1.23 million income tax threshold will apply from 2025, with the basic deduction and the minimum employment income deduction each rising by ¥100,000, to ¥580,000 and ¥650,000, respectively.
Changes to the resident tax will be applied from fiscal 2026, with the minimum employment income deduction being hiked while the basic deduction will be left unchanged at ¥430,000.
The fiscal 2024 tax system reform package featured a plan to scale down deductions for parents of children aged 16-18. A decision on the matter is now set to be made in the package for fiscal 2026 or later, however, because Komeito and the DPFP are cautious over the plan.
Meanwhile, the latest package expands a special deduction program to reduce tax burdens on parents of university students and other dependent children aged 19 to 22 with part-time jobs. The maximum annual qualifying income for such children will be raised to ¥1.5 million from the current ¥1.03 million in 2025, with those earning more than ¥1.23 million to be placed under a new deduction framework and deductions to be reduced in stages for those whose incomes surpass ¥1.5 million.
The ruling bloc deferred its decision on the timing of an income tax hike to cover planned increases in defense expenditures. Corporate and tobacco tax hikes related to higher defense spending will begin in April 2026.
