The administration and ruling bloc are in the final stages of talks to raise the income tax in 2017 on corporate employees who make more than ¥10 million a year, sources said Tuesday.
The proposal comes as Prime Minister Shinzo Abe's administration, the Liberal Democratic Party and its coalition partner, New Komeito, have already decided to raise the tax burden in 2016 on company workers earning more than ¥12 million per year.
The two-stage tax hike on salaried workers, which is to be included in the ruling camp's tax reform outline to be finalized Thursday, is expected to trigger a public backlash. Around 1.72 million people make more than ¥10 million a year.
The plan is to raise taxes on high income earners by trimming existing tax credits. At present, the maximum amount of credits for those making more than ¥15 million a year is ¥2.45 million.
Under the latest proposal, the maximum amount of credits for those earning more than ¥12 million will be reduced in stages to ¥2.3 million from 2016, and for those earning more than ¥10 million to ¥2.2 million from 2017, the sources said.
The annual tax burden on company employees earning ¥12 million a year would increase by ¥30,000, and of those earning ¥15 million by ¥110,000, according to a government estimate.
Other changes include tax breaks aimed at invigorating capital spending and research development in "strategic special zones" planned by the Abe administration to attract more people and investment from home and abroad, a pillar of its economic growth strategy.
The administration and ruling bloc will also expand the range of duty-free products for foreign tourists in a bid to bolster consumption, the sources said.