Liberal Democratic Party lawmakers have started discussions on applying a reduced consumption tax rate only to polished rice and boosting cash handouts to low-income earners, it was learned Friday.
The idea, studied as a means of cushioning the impact of the planned consumption tax hike in April 2017 to 10 percent from the current 8 percent, compares with the reduced rate that Komeito, the junior partner in the ruling coalition, wants for a wide range of products, which the LDP believes will be too costly for businesses.
A senior official on Komeito’s tax panel described the handout plan as “absolute nonsense.”
The idea was put forward at the day’s meeting of the LDP’s Tax System Research Commission, informed sources said. After the meeting, Yoichi Miyazawa, chief of the commission, said he does not rule out any possibility, adding that the panel has to discuss every option.
The government considered introducing a plan whereby ¥400 billion would be used to help offset individuals’ medical, nursing care and other social security expenses, but now those funds may be used for consumption tax relief.
The Finance Ministry estimates that a reduced rate of 8 percent applied only to polished rice when the tax rises to 10 percent in April 2017 will result in a tax revenue shortfall of ¥40 billion a year. So, ¥360 billion could be used for cash handouts.
The handouts will be based on a similar measure currently used for low-income individuals who are not subject to resident tax payments, the sources said.
Under that program, ¥170 billion is budgeted for fiscal 2015 for per-head payments of ¥6,000.