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The
LDP, and its small coalition ally Komeito, decided to forego tax
hikes for increased defense spending next fiscal year, as Prime
Minister Fumio Kishida prioritized the tax cuts as a symbol of
government efforts to push a pro-growth agenda.
Kishida's cabinet is mired in a downward spiral in public
support over rising cost of living, declining real wages and a
scandal over fundraising proceeds that is leading to a shake-up
of top ministers.
The document showed the panel decided to cap annual household
income for those who are eligible for the income tax cuts amid
concerns about a gap between haves and have nots.
It shelved a decision to increase taxes to fund a planned boost
to defense spending for the next fiscal year.
The tax panel could not be immediately reached for comment.
For households, the LDP tax panel will forego lowering a cap on
mortgage borrowing planned for next year.
To encourage a virtuous cycle of growth led by private-sector
demand, the tax policymakers are ramping up tax breaks on
companies that raise wages.
Even loss-making small firms can be allowed to carry over
preferential tax treatment for up to five years.
The tax panel has also agreed to a newly-establish tax scheme to
help spur domestic investment for companies that produce vital
materials from the standpoint of decarburization and economy
security.
The government will offer tax incentives for a decade to boost
production in five areas including electric vehicles and
high-tech chips as part of efforts to attract firms to make
big-ticket investments.
The scheme aims to make it easier for companies to invest in
Japan by providing tax benefits for projects with high hurdles
for achieving profitability in areas the government sees as
strategically important such as green transformation.
The ruling coalition will include the tax breaks in the fiscal
2024 tax reform framework that is finalised on Thursday.
(Reporting by Tetsushi Kajimoto; Editing by Jacqueline Wong)
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