Reforming the tax system into one befitting the times is a huge task. It is essential to consider reform measures meticulously by giving due consideration to fairness in a way that can win the consent of the people.
Tax system research panels of both the Liberal Democratic Party and Komeito have each launched full-scale discussions ahead of the tax system revision planned for fiscal 2018. They will integrate their proposals to compile a unified tax system outline of the coalition parties in mid-December.
Income tax is the biggest focal point. The need to reexamine the current income tax system, which has long functioned with the model of a “household of a company employee and his full-time housewife” in mind, is clear in light of the diversification of work styles.
In regard to tax cuts, there is a plan to expand the basic deduction system under which ¥380,000 is deducted across the board from taxable income.
The number of workers not directly employed by companies, including those undertaking jobs personally via the internet, has been increasing. As such workers are not eligible for employment income deductions, which amount to necessary expenses in the case of company employees, basic deductions will be expanded for them.
As a tax increase measure to make up for planned tax cuts, income deductions for company employees with an annual income of more than ¥10 million will be downsized. The deduction for the public pension of elderly people with an annual income of over ¥10 million — aside from the amount of the pension they receive — will be reduced. Such plans have been proposed.
Plans to bolster the income tax redistribution functions seem to be aiming at correcting income gaps.
Fair corporate tax vital
The plans are said to aim for neither a tax increase nor a reduction overall. Balance will be lost if an excessive tax burden is imposed on the high-income bracket only for the sake of securing tax revenue. It is imperative to avoid an easygoing way of thinking that tax should be increased on those from whom tax can easily be collected.
The global trend of emphasis on tax imposition is shifting from direct taxes such as income tax and corporate tax to indirect taxes, including the consumption tax. This is because direct taxes are liable to cause uneven tax burdens and be affected by business trends.
Reform of income tax needs to be pushed systematically. Points of contention are diverse, including a switch from income deductions, which are more beneficial for high-income earners, to a tax deduction system that is not affected by income levels. A new deduction system for married couples will be introduced to replace the deductions for spouses, a factor that contributes to hindering women’s participation in society. There are various points of contention.
Tax system reform must be tackled from a long-range perspective.
In regard to corporate tax, the expansion of tax credits for a salary growth system under which businesses that raise wages will be treated preferentially will be studied.
In addition to this, a “carrot and stick” plan has also been considered to stop preferential treatment for big businesses whose pay increases and plant and equipment investment are insufficient.
To realize an exit from deflation, it is indispensable to stimulate demand through pay raises and enhance productivity via plant and equipment investment. Even so, business conditions differ greatly from company to company.
It would be utterly backward if tax measures bind corporate activities excessively and bring about inequality between companies.