Purpose tax reform in Japan
2022.12.16 05:25
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Purpose tax reform in Japan
Budrigannews.com – Japan will extend tax breaks for cars with low emissions and try to move its enormous household savings into investments in the government’s Friday approval of the annual tax code revision.
In response to China’s and North Korea’s increasingly assertive missile launches, the government will also raise taxes on corporations, income, and tobacco to pay for a planned doubling of Japan’s defense spending to 2% of GDP by 2027.
A draft of the document that was obtained by Reuters lists the key changes that will be made as a result of the revised tax code. Upon approval by parliament, the revised code will take effect in the April 2023 fiscal year.
AUTOMOBILE TAX
Japan will extend tax breaks for low-emission cars past the end of 2023. However, starting in 2024, the level of emission reduction that must be achieved by eligible vehicles will be increased in stages. The update, which will be in effect until April 2026, will apply to half of all new cars.
Starting in 2025, gasoline-powered automobiles will also be excluded from tax breaks that the government gave to the auto industry to help it overcome supply constraints.
“NEW CAPITALISM”
Prime Minister Fumio Kishida has sought to shift Japan’s 2,000 trillion yen ($14.52 trillion) in household assets from savings to investment under his flagship “new capitalism” initiative.
The government will make a program that provides tax breaks for stock investments made by households permanent as part of this initiative. In particular, from 2024 onward, it will triple the amount of investments that are eligible for tax breaks.
CAPITAL GAINS TAX
In contrast to the income tax, which is progressive, Japan’s capital gains tax rate is the same for all income brackets.
The government will levy higher capital gains tax rates on households with annual incomes above 3 billion yen as part of efforts to reduce income inequality.
START-UPS
The administration of Kishida has emphasized the need to foster more start-ups, which have the potential to boost Japan’s sluggish economic growth.
When retail investors buy and sell stocks in start-up companies, the government will extend preferential tax breaks.
If the proceeds from the sale of start-up shares are reinvested in other venture businesses, they will not be subject to income tax.
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