TOKYO: The Government has approved a draft budget for the 2017 fiscal year that contains tax break proposals to boost Japan’s economic growth, investment, and consumption. The main budgetary tax measure would expand the existing spousal tax deduction, intended to encourage a lower-earning spouse in a dual-income family to increase their hours in employment. The maximum annual income the lower-earning spouse can receive to take full advantage of the JPY380,000 (USD3,300) spousal tax deduction is to be increased from JPY1,030,000 to JPY1.5m.
To limit the revenue lost from the measure, the tax deduction will be phased out for households where the higher-earning spouse earns more than JPY11.2m annually. In such circumstances, the deduction will be reduced to JPY260,000. The deduction will be reduced again to JPY130,000 if the higher-earning spouse earns more than JPY11.7m, and those on incomes above JPY12.2m will be ineligible. In addition, the existing tax incentives for the acquisition of eco-friendly and fuel-efficient cars is to be extended for a further two years from the beginning of the next fiscal year (on April 1, 2017), and higher corporate tax deductions will be provided to small- and medium-sized enterprises that increase their employees’ annual pay by two percent or more.
The excise tax rates on beer and similar malt-based drinks will be unified over a transitional period until 2026. Wine and Japanese sake will also have a unified tax rate. Finally, the draft budget reiterates the Government’s commitment to raising the present eight percent consumption tax rate to 10 percent in October 2019. The tax rate rise was originally programmed for October 2015 and then put back until April 2017, before being postponed again.
