The Liberal Democratic Party-New Komeito ruling bloc on Thursday formally outlined a list of tax reform goals for fiscal 2013 that raises taxes on the rich, scratches breaks for the poor and curries favor ahead of the summer Upper House election.
The outline also offers to reconfigure the vehicle weight tax so all revenues are used solely on road maintenance.
The maximum income tax rate for individuals would meanwhile rise to 45 percent from 40 percent for those making more than ¥40 million a year, while the maximum inheritance tax rate would jump to 55 percent from 50 percent in January 2015.
Revenues from the auto weight tax would be used solely for “maintenance and renewal of roads,” the outline states.
The revival of a road-specific tax, however, is likely to draw fire as a pork-barrel attempt to win favor from the construction industry. In 2009, the LDP-led government was forced to allocate revenue from road-related taxes to the general account after the public railed against massive spending on the highway network.
The two parties also agreed not to apply a lower rate to food and other daily necessities to help low-income households when the 5 percent sales tax climbs to 8 percent in April 2014, opting instead to disperse cash allowances.
The special low rates will be reconsidered before the second stage of the consumption tax hike pushes it to 10 percent in 2015, the outline said.
While New Komeito has been demanding multiple tax rates to soften the blow on low-income households, the LDP, led by Prime Minister Shinzo Abe, has argued it is too late for retailers and government offices to adopt an “invoice system” that would apparently be needed to track all the goods transactions involving multiple tax rates.
The LDP was also worried about losing revenue from such a large chunk of the populace.
Among other measures designed to stimulate the economy are special deductions for companies that increase spending on research and development or invest in equipment at home.
There is also a measure that lets firms that raise wages deduct 10 percent of the cost from taxes — under certain conditions. The outline didn’t elaborate.
The outline also offers special breaks to soften the impact of the consumption tax hikes, which are expected to dent car and home sales.
According to the outline, a special reductions for buyers of eco-friendly cars will be expanded in April 2014, when the sales tax is scheduled to climb to 8 percent from 5 percent. The auto acquisition tax, meanwhile, would be abolished in October 2015, when the second stage of the sales tax kicks in.
For homeowners, the coalition would extend the availability of a special deduction for mortgage-holders by four more years until the end of fiscal 2017.
As for the rift on exempting daily necessities, LDP tax panel chief Takeshi Noda and New Komeito counterpart Tetsuo Saito agreed Wednesday to hammer out details of a multiple-rate system by the end of December, including the items to be exempted.
Afterward, Noda said the parties hadn’t finalized the details of the cash handouts, including the amount or who would be eligible to receive them.
“We now believe we can build up a better (multiple-rate) system if we introduce (the breaks) when the tax will be hiked to 10 percent,” Saito told reporters.
He claimed the two parties agreed to introduce the special low rates when the sales tax hits 10 percent, but the joint pact Noda unveiled was more ambiguous.