The Japanese government’s tax panel is set to propose cuts in the tax deductions allowed on salaried workers’ retirement benefits which could be in force by fiscal 2006, The Yomiuri Shimbun has learned.
According to a source close to the Tax Commission, an advisory panel to Prime Minister Junichiro Koizumi, discussions will begin on the issue this autumn and will form part of a comprehensive review of the individual income tax system under fiscal 2006 tax reform plans.
Under the terms of the panel’s proposals, the government will be urged to scrap preferential tax treatment for those who receive retirement allowances after working at least 20 years for the same company.
In addition, stricter methods of calculating how much of the retirement allowances should be tax-deductible will be called for under the planned reforms.
The source indicated that the plans are motivated by changing work patterns. The present tax system for retirement allowances was built on the premise that jobs would be occupied for life. However, the Japanese labour market has become more flexible in recent times, with more workers taking temporary or part time positions.
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