The Liberal Democratic Party’s tax panel will consider proposing that households with young people not in employment, education or training — the so-called NEETs — be excluded from income tax deductions for dependents, panel sources said Sunday.

The revenue from the effective tax hike might go toward financing a possible government plan to give tax incentives to families with newborns under the effort to stem the decline in the birthrate, the sources said.

A taxpayer with a dependent is eligible for certain income tax deductions — 630,000 yen for a dependent age 16 to 22, 480,000 yen for a dependent age 70 or older and 380,000 yen for a dependent in other age categories — if the dependent’s annual income is below certain levels.

A household in which a NEET is a dependent is covered by this tax break, a system some see as a drag on parents’ efforts to promote the economic independence of such people.

The LDP’s Tax System Research Commission is considering proposing that taxpayers who have NEETs as dependents be excluded from the deductions, the sources said.

If the panel’s proposal is endorsed, annual income tax would rise by 30,000 yen for a household with an annual income of 5 million yen and a dependent aged 20 or older and by about 70,000 yen for a household with 7 million yen to 10 million yen in income and such a dependent, the sources said.

The LDP tax panel is expected to include the proposal in a reform plan to be compiled possibly in June, the sources said.

According to the government’s 2005 white paper on labor economics, the number of NEETs is estimated at 370,000, and the number of part-time workers age 25 to 34 at 990,000.

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