Rich doctors may be barred from tax relief

Ruling coalition to ensure small clinics benefit as intended


The government and the Liberal Democratic Party-led ruling coalition are thinking of excluding doctors who run their own clinics and earn ¥70 million or more a year from taking advantage of preferential tax treatment designed to help relatively small medical institutions, informed sources say.

The plan will be included in a fiscal 2013 tax system reform package the LDP and ally New Komeito will draw up Jan. 24, the sources said.

The tax relief scheme covers doctors and dentists whose annual income from fees paid by social insurance programs totals ¥50 million or less.

For example, doctors with an annual income of ¥25 million or less are allowed to treat up to 72 percent of costs calculated using a simplified method as tax-free expenses. The maximum rate is 57 percent for those making between ¥40 million to ¥50 million a year.

In 2011, the Board of Audit reported a number of cases in which doctors earning major income from services not covered by social insurance programs inappropriately took advantage of the tax relief measure. This prompted the government to review the system.

But as there are concerns, mainly among elderly doctors, that they will end up closing if the tax relief loophole is abolished, the government plans to keep the system intact while excluding doctors who earn ¥70 million or more from benefitting from the preferential treatment, the sources said.

Lower sales tax rate

Tax policy leaders in the Liberal Democratic Party and ruling coalition partner New Komeito have agreed to introduce a special lower consumption tax rate for food and other items.

LDP Tax System Research Commission Chairman Takeshi Noda and his counterpart at New Komeito, Tetsuo Saito, agreed Friday that the step is necessary to help ease the impact that the scheduled consumption tax hike will have on low-income households.

The 5 percent consumption tax is scheduled to be raised to 8 percent in April 2014 and to 10 percent in October 2015. New Komeito wants to introduce the special rate at the time when the first hike takes place; the LDP wants to do it later.

The two parties will hold further discussions Monday to decide when the special rate should take effect and to what items it should be applied.

The outcome will be reflected in the tax system reform guidelines for fiscal 2013, which will be adopted as early as Thursday.

“The introduction of a lower tax rate is inevitable,” Noda said.

The special rate will require a lot of preparation, Noda said, adding that the ruling bloc will need to talk with the retail and other industries so tit can win their support.

The LDP, New Komeito and the Democratic Party of Japan put off their conclusion on proposed measures to reduce the impact of the planned two-stage consumption tax hike on poor families, when the three struck a tax hike legislation deal in June last year.