Thursday, Jan. 10, 2013

By AYAKO MIE

The ruling Liberal Democratic Party and its junior coalition partner, New Komeito, kicked off tax-revision talks Wednesday, aiming to provide incentives to attain the government's goal of steering Japan out of its chronic economic doldrums, with possible breaks for low-income earners for daily necessities.

In the first such meeting since the coalition came to power after the Dec. 16 general election, executives of the LDP's Tax System Research Commission and those of New Komeito agreed to compile basic tax reform outlines by Jan. 24 together with the Democratic Party of Japan, which is now in the opposition camp.

On tax reforms, the three parties are basically on the same page. Last June, they agreed on the integration of tax and welfare system reforms before passing the contentious, DPJ-sponsored bill to hike the consumption tax.

At the beginning for the meeting, tax panel chief Takeshi Noda vowed to hammer out viable proposals.

Items to be submitted include tax deductions for research and development in green and renewable energy sources, and lower levies for automobile purchases and home mortgages.

The talks will also look at raising the income tax on the wealthy from the current 40 percent and a rethink of inheritance taxes.

A key issue will be whether the LDP and New Komeito can agree on lowering the sales tax on daily necessities such as food if the consumption tax actually is raised from the current 5 percent to 8 percent in April 2014 and then to 10 percent in October 2015.

To ease the impact of the tax hikes on low-income earners and people on welfare, New Komeito wants the lower rates on daily necessities to be introduced when the sales tax is first hiked.

The party also wants more items subject to a lower levy, including books, when the second hike kicks in.

Yoichi Miyazawa, vice president of the LDP tax panel, stressed the two parties don't differ, noting both in 2009 had already agreed on introducing steps to ease the sales tax burden on some people.

But another LDP executive said it would be difficult to apply such measures from 2014 due to the complexity of processing tax invoices if daily necessities are to be differentiated from other purchases.

Education 'gift' waiver

The Liberal Democratic Party-led government will offer tax exemptions for people who finance the education of their grandchildren as part of the new economic stimulus package, sources said Wednesday.

The stimulus package to be unveiled Friday will also include other tax incentives to boost the economy, which has been mired in chronic deflation, such as lower levies for firms increasing payrolls and business investment.

The LDP tax panel has discussed exempting capital transfer tax for those donating funds in a lump sum to their grandchildren for tuition fees and other costs. The tax exemption will likely be available for donations of up to ¥15 million, the sources said.

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