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Ruling bloc tax chiefs agree reforms that will raise income taxes for employees earning over (¥8.5 m) each year,

Ruling bloc tax chiefs agree reforms that will raise income taxes for employees earning over (¥8.5 m) each year,

TOKYO: The tax policy chiefs of the ruling Liberal Democratic Party and its coalition partner, Komeito, agreed Monday to raise income tax for corporate employees earning over ¥8.5 million annually, starting on January 2020.

 

The agreement was reached in a meeting between Yoichi Miyazawa, chairman of the LDP’s Research Commission on the Tax System, and his Komeito counterpart, Tetsuo Saito. The income threshold for the tax increase was raised from the previously proposed ¥8 million.

Once the two parties give final approval to the plan, the ruling coalition will include it in its annual tax system reform package, expected to be adopted on Thursday, sources said.

The agreement calls for increasing basic deductions from taxable income by ¥100,000 for all taxpayers, while reducing additional deductions by ¥100,000 for salaried workers.

Under the agreement, the maximum salary income deductions will be lowered from the current ¥2.2 million to ¥1.95 million.

The reform is expected to increase annual income tax by some ¥15,000 for corporate workers with annual incomes of ¥9 million, by about ¥30,000 for those earning ¥9.5 million, and by around ¥45,000 for incomes of ¥10 million.

Households with dependents aged 22 or younger or with family members in need of nursing care will avoid the tax increase.

Income tax will be lowered for self-employed and freelance workers who are not eligible for salary income deductions.

The income tax reform is projected to increase the government’s annual tax revenues by ¥90 billion.

The LDP previously agreed on the lower income threshold of ¥8 million for the tax increase, but Komeito opposed the plan claiming that it would hit middle class workers hard.