Prime Minister Shinzo Abe's Cabinet on Tuesday approved tax policy changes for fiscal 2014, imposing higher taxes on households despite a planned sales tax hike, while giving benefits to companies to shore up the economy.
The new tax reform plan is estimated to make tax cuts of ¥739.1 billion for the next fiscal year starting April 1 in combined state and local taxes from this fiscal year, the Finance Ministry said.
To bolster industrial competitiveness, the government will end this March, one year earlier than scheduled, a special corporate tax surcharge introduced to fund reconstruction work in areas hit hard by the March 2011 earthquake and tsunami.
Tax breaks will also be provided to companies operating in "strategic special zones," which the government plans to establish to attract more people and investment from home and abroad, a pillar of its economic growth strategy.
Aiming to avoid a sharp downturn in car sales following the planned consumption tax hike, the government will cut the vehicle acquisition tax levied at the time of purchase to 3 percent from the current 5 percent.
On the other hand, it will raise the tax on ownership of minicars — vehicles with engines no larger than 660cc — for personal use from ¥7,200 a year to ¥10,800. The change will apply to new minicars — accounting for about 40 percent of new car sales in Japan — purchased after April 2015.
Meanwhile, the government will increase the income tax paid by company employees who make more than ¥12 million a year from 2016 and by those earning over ¥10 million from 2017, by trimming tax credits.