The tax panels of the ruling parties have decided to skip a tax hike for capital gains and dividends in reforms for fiscal 2019, sources have said.
Currently, capital gains and dividends are subject to a 20 percent tax, consisting of a 15 percent income tax and a 5 percent residential tax. The Finance Ministry hopes to raise the total tax rate to 25 percent in a bid to increase tax revenue by some ¥250 billion.
The investment tax hike has been eyed as the government plans to exempt food products and some other items from the planned consumption tax increase, to 10 percent from the current 8 percent, in October 2019. The planned exemption is forecast to reduce the consumption tax hike’s revenue-boosting effects by ¥1 trillion, and the ministry is eager to recoup the loss.
But senior members of the Liberal Democratic Party’s tax research panel have argued that the investment tax hike could put cold water on investor sentiment and deal an additional blow to financial institutions struggling with the current superlow interest rates.
IN FIVE EASY PIECES WITH TAKE 5