(Bloomberg) — Japan’s ruling Liberal Democratic Party is considering tax hikes on corporations, individual income and tobacco from 2024 or later to help fund a planned expansion of defense spending, according to a document seen by Bloomberg.
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An increase of 4 to 4.5 percentage points in corporate tax, a 1 percentage point increase in income tax and an extra ¥3 per cigarette on tobacco are under consideration, the document showed. Companies with revenue of less than 10 million yen a year won’t be affected by the corporate tax hike, according to the document.
The general policy of increasing taxes would be included in the tax framework to be agreed by the end of this week, LDP lawmaker Yuji Yamamoto said. But details won’t be included in the tax revisions to be discussed in next year’s ordinary session of parliament, he said. The specifics will be firmed up in a year’s time.
The three items combined will be used to generate more than ¥1 trillion ($7.4 billion) of the extra annual funding required for defense by the fiscal year starting in April 2027.
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Prime Minister Fumio Kishida is facing opposition from within his party to his plan to increase taxes to bolster the country’s defenses, with some expressing concern about the potential effect on a fragile economy.
He’s planning an unprecedented expansion of defense outlays by nearly 60% to ¥43 trillion over five years, to counter growing threats from China, North Korea and Russia. So far the government has scrambled to pull together as much funding as possible from surpluses and non-tax revenues.
Kishida Says He Won’t Rely on Bonds to Fund Japan Defense Hike
A special income tax to fund rebuilding in the aftermath of the 2011 tsunami and nuclear disaster would be reduced by 1 percentage point and extended by an unspecified period, according to the document seen by Bloomberg.
Yamamoto said the details of the plan may change over the coming year, as disagreement continues within the party.
–With assistance from Isabel Reynolds.
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