Japan Passes Recovery Funds Tax Bill
November 25, 2011 Taxation in Japan
TOKYO – The major political parties of Japan have come to some agreement on the matter of taxation, taking the first steps to increasing rates and raising extra funds for the country’s rebuild following the recent spate of natural disasters.
Months of political debate came to an end on November 24th when the Lower House of Parliament of Japan approved new legislation which paves the way for the government to hike some tax rates as a means of raising revenues to fund earthquake recovery programs.
The legislation allows the government to instate an increase to the country’s personal income tax rate, for a period of 25 years starting from 2013. The extra funds raised by the tax rate increase will be used exclusively to service the government’s sovereign debts. Prime Minister Yoshihiko Noda has repeatedly maintained that the government will not issue any significant amounts of extra bonds without first finding new revenue streams to address the resulting interest and servicing payments.
The newly passed legislation will also allow the government to temporarily reduce the country’s corporate income tax rate. The rate cut is aimed at boosting capital spending, and easing conditions for businesses suffering from the effects of waning domestic demand and a rising national currency.
Before any changes can be implemented, the new legislation still needs to be approved in the Upper House of Japan, where the national opposition holds a majority. Political analysts in Japan have said that the approval could come as early as next week, as both the ruling Democratic Party of Japan and the major opposition seem to have come to an agreement over the necessity for raised taxes. The exact rate at which both taxes will be changed has not yet been decided, and discussions will begin once the legislative change is approved.
Photo by narumi-lock