Japan pushes tax reform to raise wages under ‘new capitalism’ plan

Newly appointed Japanese Minister of Economy, Trade and Industry Miyazawa speaks during a press conference at his ministry in Tokyo
FILE PHOTO: Japan’s newly appointed Minister of Economy, Trade and Industry Yoichi Miyazawa speaks during a news conference at his ministry in Tokyo October 21, 2014. REUTERS/Toru Hanai

December 10, 2021

By Tetsushi Kajimoto

Japan’s ruling party will review taxes on investments next year, a top party official said on Friday, as it and its coalition partner adopted a plan. annual reform plan to encourage wage increases to promote and distribute wealth.

The first annual tax reform plan under Prime Minister Fumio Kishida, who took office in October, focuses on his policy goal of a “new capitalism” to create a growth cycle. and wealth distribution to beat deflation.

“We have to look at how to deal with financial income tax from next year,” said Yoichi Miyazawa, a veteran member of the upper house who heads the ruling Liberal Democratic Party’s tax committee.

He told reporters that a lot of work remains to be done on tax reform.

Since coming to power, Kishida has pressured Japanese companies to raise wages, urging profitable companies that have returned to pre-pandemic levels to raise wages by 3% or more.

Under the reform plan passed on Friday, companies that raised wages by 4% year-over-year and stepped up training of workers could get a deduction of up to 30% on their taxable income.

Regarding the taxation of investment income – which applies to capital gains from stocks and assets, dividends and interest payments on savings and Japanese government bonds – the plan calls for “a full review of area”, without giving specifics.

Japan’s investment income is low compared to advanced OECD and G7 countries, at 20%, much lower than income tax of up to 45%.

Low rates help reduce the tax burden for high earners, who tend to earn more through investments.

Kishida, who has made the distribution of wealth a main agenda item, previously flagged the possibility of raising taxes on investments.

But he quickly reverted to his pledge in October after being criticized for risking undermining the stock market.

Friday’s plan directs the elimination of a “carbon tax”, reflecting industry opposition even as Japan aims to cut carbon emissions on a net-zero basis by 2050 to combat warming. up globally.

(1 dollar = 113,6000 yen)

(Reporting by Tetsushi Kajimoto; Editing by Kevin Liffey, Robert Birsel) Japan pushes tax reform to raise wages under ‘new capitalism’ plan

Bobby Allyn

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