Japan plans to raise key taxes in 2026 to fund defence budget expansion
2024.12.11 23:31
By Yoshifumi Takemoto
TOKYO (Reuters) – Japan’s government plans to raise the country’s key taxes starting in April 2026 to fund more defence spending after a one-year delay, according to a document seen by Reuters on Thursday.
The plan, following through on former Prime Minister Fumio Kishida’s commitment to raise taxes to double defence spending to 2% of gross domestic product by 2027, calls for lifting the country’s corporate tax and tobacco tax starting as early as April 2026.
The government also plans to increase income tax in January 2027, the document showed.
The corporate tax hike would take the form of a surtax of 4%, and the income tax rise would be a surtax of 1%. The tobacco tax will be first raised for heated tobacco to match the rate for cigarettes, to be followed by three hikes for the overall rate through April 2029.
Income tax burdens will be offset by a reduction in the disaster reconstruction income surtax rate by 1%.
The government estimates the tax increases will boost revenue by 1 trillion yen ($6.56 billion) in the year starting in April 2027.
The plan would need approval from the ruling coalition, as well as from the Democratic Party for the People (DPP), a key opposition party whose cooperation is crucial for the coalition to stay in power.
The coalition government agreed in 2022 to raise tax rates to increase the defence budget, but stiff opposition among lawmakers has delayed implementation of the move.
($1 = 152.3700 yen)
