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KOCHI (Kyodo) Prime Minister Taro Aso said Saturday the government might make substantial cuts in the gift and inheritance taxes to put the financial assets of the elderly to work in stimulating consumption.

Aso unveiled the plan in the city of Kochi while answering questions on an additional economic package being put together by the government and the ruling parties.

“(The government) will study reducing the tax by designating a period of years in which the elderly can give their money to their sons and grandchildren to buy houses and cars,” Aso said.

Pointing out that Japan’s household assets amounts to about ¥1.4 quadrillion, the prime minister said the money would not be used unless passed from the elderly to the younger generation.

“If people can prove that they have spent the money (on houses and cars), they should be subjected to a tax reduction,” he said.

Finance Minister Kaoru Yosano is also in favor of putting a gift tax reduction into the next stimulus package.

Some Liberal Democratic Party lawmakers have proposed expanding the basic deductions on the gift tax to ¥20 million from ¥1.1 million, and allowing parents to make tax-free gifts to their children to buy automobiles and homes.

The gift tax reduction is expected to be part of the new stimulus package.

On Tuesday, Aso plans to ask Yosano to compile a supplementary budget for fiscal 2009 to finance the package.

However, some might criticize such a tax reduction as only benefiting the wealthy, and its impact on the economy might be limited.

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