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Japan finalizes income tax reform plan,

Japan finalizes income tax reform plan,

TOKYO: A fiscal 2018 tax plan endorsed by Japan’s ruling parties settles details of a shift in income tax burdens while recognizing that further adjustments will have to come down the road as the labor market charges.

The tax panels of the ruling Liberal Democratic Party and junior partner Komeito adopted the outline’s general framework in a conference Tuesday.

“We won acceptance on all points,” Yoichi Miyazawa, chair of the LDP’s tax commission, told reporters after the meeting. The ruling coalition is set to formally approve the plan Thursday.

The income-tax adjustment will take effect in January 2020. The reform is not comprehensive, however, and more adjustments are set to come in 2021 or thereafter. A pillar of the plan is slashing earned income exemptions on company workers making more than 8.5 million yen ($74,800) per year, while expanding the basic exemption that all taxpayers can use. The tax panels’ heads had previously set the threshold at 8 million yen. The plan falls short of a vision for income tax reform over the long term. Raising taxes on high income employees is far from an overhaul of the system.

Giving the basic exemption a bigger role in adjusting tax burdens is important from the perspective of encouraging work reform, the outline says. It adds that the government may consider shifting more weight onto the exemption in accordance with the continuing diversification of work styles.

Taxes will not be raised on people with children age 22 or younger or those taking a special disability exemption, the planners have said.

On the corporate tax front, companies that raise wages or increase productivity will receive generous breaks, while those that miss such requirements will be unable to claim certain breaks. The government will also consider temporary legal provisions aimed at improving productivity.

Business inheritance taxes will get a special, decadelong break in order to encourage more owners to pass their enterprises on to a new generation.