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Japan’s LDP Agrees To Halve Income Tax Cuts

by Mary Swire, Tax-News.com, Hong Kong

15 December 2004


Japan's ruling Liberal Democratic Party has approved proposals to halve special income tax reductions implemented in 1999, a senior LDP official has revealed.

"Our plan is to cut the 20% income tax break to 10%, or the value of the breaks from Y250,000 to Y125,000, starting January 2006," Yuji Tsushima, the head of the LDP's tax research panel, indicated this week.

Tsushima added that the proposals will also cut residential tax breaks to 7.5% from 15%, or to Y20,000 from Y40,000, starting June 2006.

The rest of the tax break will be dissolved when the government considers that economic conditions have improved sufficiently to do it, Tsushima stated.

It is thought the removal of the income and residential tax breaks will raise some Y3.3 trillion (US$31.2 billion) in revenues for the cash-strapped government.

The coalition, which includes the New Komeito, is due to unveil the plans today as part of the government’s overall plans for tax reform in the next fiscal year.

However, not all members of the coalition are happy about reversing the tax cuts, which were introduced in 1999 to help pull the economy out of a severe recession, and many fear the fragile economic recovery could be nipped in the bud.


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