• Kyodo

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To make up for the loss of revenue when levies on certain necessities are lowered when the consumption tax is raised, the government may hike the tobacco tax, sources said Tuesday.

The ruling coalition led by Prime Minister Shinzo Abe’s Liberal Democratic Party staged a sweeping victory in Sunday’s general election while pledging to boost spending on education and child care with funds to be secured from the consumption tax, which will be raised to 10 percent from 8 percent in October 2019.

But the government is also set to introduce lower tax rates on some daily necessities to soften the impact of the higher consumption tax on lower-income households. The measure is expected to reduce revenues from the tax hike by around ¥1 trillion ($8.8 billion).

The government and ruling parties will soon start discussing the envisaged tobacco tax hike as part of annual tax reforms for fiscal 2018 starting next April. The draft reforms will be compiled by year’s end.

It is unknown how much the government would be able to secure with the tobacco tax hike. When the country last raised the tax in 2010, state revenues increased by several hundred billion yen.

Revenues from the tobacco tax stood at around ¥2.2 trillion for fiscal 2015, while the number of smokers has been decreasing in the country partly due to tax increases in the past. The trend could affect the extent of the next tax hike, the sources said.

As for other alternative revenue sources, the government is also looking to increase taxes on incomes from financial transactions such as dividends on stocks and stock trading, the source said.

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