• Kyodo

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The ruling Liberal Democratic Party basically agreed Thursday to raise the income threshold for the spousal tax deduction system to ¥1.5 million ($13,300) from ¥1.03 million to encourage more women to participate in the workforce.

The current threshold on annual earnings has been criticized for discouraging women from working long hours or taking full-time jobs.

To avoid a decline in tax revenue, households with annual income exceeding ¥11.2 million will not qualify for the tax deduction under the proposal by the LDP’s tax commission, lawmakers said.

At a meeting of its senior members, LDP tax commission chief Yoichi Miyazawa also presented a plan to raise the threshold to ¥1.3 million, but they are likely to settle at ¥1.5 million, some lawmakers said.

The LDP tax panel will make a final decision on the issue after discussions within the party and with junior coalition partner Komeito. The new measure will be part of their tax reform plan for fiscal 2017 starting in April.

If the spousal income threshold rises to ¥1.5 million, more than 3 million households that have housewives working as part-timers will become newly eligible for the tax break, according to a Finance Ministry estimate.

At the same time, 1 million households will face higher taxes if the proposal to abolish the tax break for households that make over ¥11.2 million a year goes through. The LDP will study measures to reduce the impact on such households to ease the likely drop in earnings.

The spousal tax deduction was introduced in 1961 to support housewives whose husbands worked extensively outside the home when Japan was enjoying a spurt of exceptionally high economic growth.

Under the current system, taxpayers can claim a special deduction of ¥380,000 from taxable income if their spouse earns no more than ¥1.03 million a year.

But calls to revise the system have increased, with some arguing it is unfair to give preferential treatment to households with full-time housewives when dual-income families are on the rise.

The government also faces the need to come up with measures to increase workforce participation by women to cope with its growing labor shortage, low birthrate and rapidly graying population.

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