The ruling camp formally agreed Thursday that it will “aim to” lower the tax rate on daily necessities when the doubling of the consumption tax rate is completed in April 2017, lawmakers said.
Prime Minister Shinzo Abe’s Liberal Democratic Party and its junior coalition partner Komeito also said they will incorporate the tax policy in their joint campaign pledges for the general election, which is to be held on Dec. 14, the lawmakers added.
It was the first time the two parties have specified a timeline for reducing taxes on daily products such as food before the tax rate climbs to 10 percent from 8 percent.
But on Thursday, Takeshi Noda, chief of the LDP’s tax panel, said “it’s difficult to categorically say” that the special lower rates will be introduced at the same time as the second tax hike. The first hike took place in April.
“Some people, such as those at small companies, have very tough views on the (plan). We need to carefully discuss the issues, including what items should be covered” by the special rates, Noda told reporters.
The special rates would complicate clerical work for retailers and wholesalers. Many, particularly small businesses, are against the proposal.
Some LDP lawmakers who rely on the support of small businesses are opposed to the plan. Others have been reluctant to introduce a lower rate because the measure will likely dent tax revenues.
Komeito has been eager to go through with it to prevent the second tax hike from increasing the burden on already struggling households.
The two parties eventually agreed to “aim to” lower the tax rate on certain items a day after Abe announced he would dissolve the House of Representatives on Friday to call a snap election.
Abe is framing the poll as a way to assess whether voters support his radical economic program and the decision to delay the second tax hike, originally planned for next October, by 18 months.
On Monday, new economic data showed that the economy had fallen back into recession just months after the first, 3-point consumption tax hike took effect on April 1.
Abe said at a news conference Tuesday he would urge the LDP and Komeito to “seriously” consider whether the tax rate on daily necessities should be reduced to cushion the blow from the second hike. But it remains to be seen how the ruling coalition will conclude its discussions on the issue.
Finance Ministry officials have been against the plan because it would create too much paperwork for smaller companies and cut tax revenue.
Legislation should be passed by next fall if the proposed system is to take effect in April 2017, officials said.
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