Japan implements tax reform to raise wages as part of “new capitalism” plan

Japan’s new Minister of Economy, Trade and Industry Yoichi Miyazawa speaks at a press conference at his ministry in Tokyo on October 21, 2014. REUTERS / Toru Hanai

TOKYO, December 10 (Reuters) – The ruling party in Japan will review investment taxes next year, a senior party official said on Friday, as he and his coalition partner approved an annual reform plan aimed at encouraging wage increases to stimulate and distribute wealth.

Prime Minister Fumio Kishida’s first annual tax reform plan, who took office in October, focused on his political goal of a “new capitalism” fueling a virtuous circle of growth and wealth distribution to overcome the deflation.

“We need to think about how to respond to the financial income tax from next year,” said Yoichi Miyazawa, a veteran member of the upper house of parliament who heads the Liberal Democratic Party’s tax panel. in power, referring to the tax on investments.

He told reporters there was still a lot of work to be done on tax reform.

Since taking office, Kishida has pressured Japanese companies to raise wages, urging companies whose profits have returned to pre-pandemic levels to raise wages by 3% or more.

As part of the reform plan approved on Friday, companies that increase wages by 4% from the previous year and boost worker training can get deductions of up to 30% from their taxable income.

On the taxation of investment income – imposed on capital gains on stocks and property, dividends and interest payments on Japanese government savings and bonds – the plan called for ” a global consideration “, without giving details.

Japan’s investment income is low among advanced OECD and G7 countries at 20%, well below income tax of up to 45%.

The low rate helps keep the tax burden low for high income earners, who tend to earn more through investments.

Kishida, who has made the distribution of wealth a main objective, had previously raised the possibility of increasing the tax on investments.

But he quickly reneged on his promise in October after being criticized for risking undermining the stock market.

Friday’s plan avoided a “carbon tax,” reflecting industry opposition even as Japan aims to reduce carbon emissions to zero on a net basis by 2050 to fight global warming .

($ 1 = 113.6000 yen)

Reporting by Tetsushi Kajimoto; Editing by Kevin Liffey, Robert Birsel

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