Tokyo, December 11, 2018 : .The Japanese government approved a fiscal plan for 2022.
It focused on encouraging companies to increase wages with tax incentives.This was in order to help boost household incomes, and reduce consumption that has been affected by the Covid-19 pandemic.
Large corporations that hike wages by at least 3 per cent will be eligible for tax reductions, while for small businesses, raising at least 1.5 per cent is needed, reports Xinhua news agency.
At the same time, some key issues, including a hike in the capital gains tax and the introduction of a carbon tax to accelerate the decarbonisation drive in Japan, were left untouched.
Liberal Democratic Party, the ruling coalition, and Komeito (its junior coalition partner), will present the required bills to the January Diet session.
Starting in April 2022 with a two-year effective period from the fiscal year 2022, the new taxation scheme to facilitate pay hikes will offer a tax deduction of up to 30 per cent for large firms and 40 percent for small companies, depending on the level of increase in wages and investment in employee training.
According to the Japanese Trade Union Confederation, the average wage increase was 1.78 per cent for the current fiscal year.
Fumio Kishida was elected Prime Minister in October.
He has pledged to increase support for companies that raise wages as well as to redistribute wealth.This new plan is in keeping with Kishida’s promise to increase middle-class incomes.
“It is our challenge to make pay hikes a long-term development, not just a one-off achievement,” Finance Minister Shunichi Suzuki told reporters here.
As for other areas, the current tax rate for the capital gains and dividends will be maintained at 20 per cent.
Although Kishida stated that raising the tax rate was an option, he later backed it up due to concern over the impact on the stock markets.
The plan said the government would continue to examine the financial income taxation.
The latest plan did not include anything related to the carbon tax, which the ruling parties had been eyeing to introduce for greenhouse gases reduction purposes.
Additionally, the tax package will impose duties on multinational major companies regardless of where they are located.
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