The ruling Liberal Democratic Party and its coalition partner, New Komeito, decided Sunday not to lower tax rates on food and other necessities when the first stage of the consumption tax hike occurs in April 2014.
The two parties, however, failed to agree on when the special rates should be applied to alleviate the impact of the two-stage tax increase on low-income families, informed sources said.
The 5 percent consumption tax is scheduled to rise to 8 percent in 2014 and 10 percent in October 2015.
New Komeito demanded that the special rates be introduced along with the first-stage hike, but the LDP rejected it, saying there would not be enough time to both select the specific items and draft measures to limit the resulting clerical burden on companies, an LDP executive said.
The negotiations will continue until the two parties compile their tax reform guidelines on Thursday, informed sources said.