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Wednesday, Dec. 23, 2009

Cabinet to hike tax burden ¥980 billion

More backpedaling on campaign promises

Staff writer

The Cabinet led by Prime Minister Yukio Hatoyama adopted on Tuesday a set of tax reforms for fiscal 2010 that would increase the burden on taxpayers by a total of around ¥980 billion a year.

The plan has the government maintaining the current gasoline tax rate, abolishing deductions for families with young dependents and raising the tobacco tax.

The tobacco tax hike — ¥3.5 per cigarette — is expected to raise the retail price of a pack of cigarettes by ¥100. The government estimates this will bring in an additional ¥120 billion a year.

The reform plan contrasts with the Democratic Party of Japan's election pledges to reduce the burden on households to spur economic growth, which could further hurt the popularity of the DPJ-led government.

Meanwhile the government will start providing a total of more than ¥2 trillion in allowances for households with young children.

Hatoyama praised his tax panel's efforts to compile policy recommendations that included some tax hikes.

The panel would have had a much easier time if its debates had only been on cutting taxes, Hatoyama said.

"But not only tax cuts but also some tax hikes have been compiled" in the panel's recommendations, Hatoyama said at the panel meeting after receiving the plan.

"The conclusion has been hammered out in the belief that this nation and people's livelihood as a result will get better" with some tax hikes, Hatoyama said.

The administration decided to effectively maintain the gasoline tax at its current rate, even though the provisional surcharge will disappear.

Although the DPJ had promised in last summer's general election to abolish the gasoline surcharge from next fiscal year to cut the tax burden by ¥2.5 trillion annually, the government will now maintain the gasoline tax rate given recent stable prices of oil, the need to address global warming, and the government's sharply falling tax revenues.

With the new child care allowances and tuition-free high school system to be introduced, the Cabinet decided to abolish income tax deductions for families with children up to the age of 15 and to cut special tax breaks for families with children aged between 16 and 18.

The government meanwhile decided to maintain deductions for families with dependents aged between 23 and 69.

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The Japan Times

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