The Liberal Democratic Party and Komeito on Jan. 24 adopted a tax outline for fiscal 2013, with emphasis on support to business enterprises, including measures to encourage wage increases, employment expansion, capital investment, and investment for research and development.
The outline envisages a tax reduction of some ¥250 billion in fiscal 2012 in both national and local taxes. The ruling coalition apparently hopes to increase voters' support in the coming Upper House election by presenting tax measures expected to contribute to pulling the Japanese economy out of deflation. If the economy fails to pick up and tax revenues do not increase, Japan will be forced to rely more on debt financing.
Reflecting the desire of the auto industry, the automobile acquisition tax, under which a 5 percent tax is levied on passenger cars, will be abolished in October 2015 when the consumption tax rate is raised to 10 percent following a hike to 8 percent in April 2014 from the current 5 percent. Abolition of the tax will help the auto industry, which fears that the consumption tax rate increase will dampen car sales.