As the ruling Liberal Democratic Party's proposal to fund a defense budget hike with a special income tax originally intended for disaster reconstruction draws criticism, party executives are planning to split the levy in half and create a new defense tax.
The LDP tax panel on Thursday agreed on the basic framework of using corporate tax, tobacco tax and income tax for the increase in defense spending over the next five years through the fiscal year beginning April 2027, while details were left for its chairman, Yoichi Miyazawa, to decide. The LDP and its junior coalition partner Komeito are expected to sign off on the plan on Friday.
The reconstruction tax adds a 2.1% levy to individual income tax through 2037, generating about ¥400 billion ($2.9 billion) in revenue for the government each year.