LDP Begins Mulling 2027 Income Tax Hike to Fund Defense Spending

Tokyo, Dec. 5 (Jiji Press)–Japan’s ruling Liberal Democratic Party on Friday began discussions aimed at increasing the income tax rate in 2027 as part of efforts to secure financial resources for a hike in the country’s defense spending. The tax hike plan was included in the fiscal 2023 tax system reform outline, but the start date had not yet been set. The ruling party determined that securing necessary funding for national security could not be delayed any longer. But some in the LDP’s coalition partner, Japan Innovation Party, also known as Nippon Ishin no Kai, are opposed to the proposed tax increase. “We believe that clearly showing Japan’s stance on national security, including the funding source, will lead to improved deterrence,” LDP tax chief Itsunori Onodera told reporters the same day. Under the LDP’s plan, the current income tax rate will be raised by 1 percentage point, while the rate of a special income tax to fund revitalization efforts following the 2011 major earthquake and tsunami that mainly struck northeastern Japan will be lowered by an equivalent of 1 point, meaning the burden on the public will not change for now. However, it has been decided that the special revitalization tax will be implemented for longer than initially planned, effectively resulting in higher tax burdens. The fiscal 2023 tax system reform outline called for securing over 1 trillion yen in funds in fiscal 2027 from increases in corporate, income and tobacco taxes, to be implemented in stages over multiple years. The government has decided to raise the corporate and tobacco tax rates starting in April 2026. But it has yet to set the start of the income tax hike, as some in the ruling bloc took a cautious stance on the matter while efforts were being made to reduce tax burdens through an increase in the minimum taxable income threshold. END [Copyright The Jiji Press, Ltd.]