Japan to approve tax-code revision, OKs defence tax, with delay -draft

By Tetsushi Kajimoto and Takaya Yamaguchi

TOKYO (Reuters) -Japan’s ruling bloc is set to agree on Friday to implement changes to national taxes, aiming to shift household assets into investment as part of Prime Minister Fumio Kishida’s “new capitalism” agenda.

The draft annual tax-code revision seen by Reuters is expected to be approved by Kishida’s cabinet on Friday.

Under his flagship initiative aimed at redistributing income, Prime Minister Fumio Kishida has sought to shift Japan’s 2,000 trillion yen ($14.52 trillion) in household assets away from savings and into investment.

As part of this initiative, the government will make permanent a programme that offers tax breaks for households’ stock investments. It will triple the limit on investments eligible for tax breaks starting in 2024.

As part of efforts to narrow income disparities, the government will apply higher capital gains tax rates for households with annual income above 3 billion yen.

The ruling Liberal Democratic Party (LDP) and its ally Komeito also endorsed a plan to raise corporate, tobacco and disaster-reconstruction income taxes by some 1 trillion yen ($7.3 billion) to double military outlay to 2% of GDP by 2027.

However, the ruling coalition stopped short of confirming when to implement the defence tax increases, effectively delaying a decision at least until next year due to stiff opposition against unpopular tax increases from within the LDP as Kishida’s popularity wanes.

“It will be implemented at “an appropriate time” from 2024 onwards,” LDP tax panel head Yoichi Miyazawa told reporters on Thursday.

Japan would adopt a corporate surtax of 4%-4.5% with a deduction of 5 million yen for small firms, while adopting surtax of 1% on incomes for the time being. Tobacco tax will be also raised in stages by 3 yen per cigarette, the draft showed.

($1 = 137.4000 yen)

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