Three opposition parties on Feb. 21 effectively gave up their joint attempt to demand the continuation of special tax cuts this year, enabling the government to cement its plan to raise income taxes by 2 trillion yen a year.
Talks between Shinshinto and two smaller opposition parties broke down, ending the prospect of the three jointly urging the ruling bloc, led by the Liberal Democratic Party, to revive the special cuts in income and residential taxes. The consumption tax hike, scheduled for April, and the end of the income tax cuts means tax increases will total an estimated 7 trillion yen this year. The income tax cuts, described by the government as temporary, had been in place since 1994.
After talks over the past few weeks, policymakers of Shinshinto, the Taiyo Party and the Democratic Party of Japan found that it would be “almost impossible” to narrow the gap between them on the issue, the policymakers said. Shinshinto and the Taiyo Party, a splinter group of Shinshinto, hoped that the three opposition parties could put concerted pressure on the ruling camp concerning the tax break so as to sustain the economic recovery. The DPJ, however, maintained that expenditure cuts should come before tax relief because of Japan’s weak financial condition.
The extension of the 2 trillion yen in tax cuts has been repeatedly demanded by the Japanese Trade Union Confederation (Rengo), which supports all three parties.