Plans under consideration regarding taxes

Last week the chairman of a committee that is responsible for examining the tax situation in Japan said that three are three plans under consideration for temporarily increasing certain taxes in order to raise revenues. The increased revenues will be used to pay for recovery of areas affected by the earthquake and tsunami in March. In short, the plans are to either:

  • increase local (personal) taxes, corporate taxes, and income taxes
  • increase income taxes, corporate taxes, and taxes on tobacco and alcohol products
  • increase just the sales tax rate

The plans wouldn’t go into effect until 2012 and would last between 5 and 10 years. However, because setting a definitive time limit on the the tax increase will negatively impact their effectiveness, no expiration date is likely to be set in stone.

The rates of increase being considered are somewhere between 5% over 10 years, or 10% over 5 years. If a 10% increase were to pass, that would translate into about a 1,000 yen increase per month in taxes for households earning more than 5 million yen a year.

On the other hand, Mainichi News reported last week that the Japan Association of Corporate Executives (JACE) is still adamant about seeing that a 5% decrease in corporate taxes be enacted next year. Before the earthquake the government was likely to pass a bill that would reduce corporate taxes, but since the earthquake that plan has been put on hold. Yasuchika Hasegawa, the association’s representative, said to the effect that continuing under the current tax system of high corporate taxes will decrease Japan’s attractiveness as a place to invest in and give Japanese companies a disadvantage when competing with companies in countries with more favorably corporate tax systems.

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