Takaichi to Instruct LDP Thurs. on Consumption Tax Cut

Tokyo, July 29 (Jiji Press)–Japanese Prime Minister Sanae Takaichi is set to instruct senior officials of her ruling Liberal Democratic Party on Thursday to make necessary preparations for a law revision to implement a two-year consumption tax rate cut for food items to 1 pct from April 2027. The government and the ruling coalition, which also includes the Japan Innovation Party, hope to formalize the tax cut policy in early August and submit a bill to amend related legislation to an extraordinary session of the Diet, the country’s parliament, seen to be convened this autumn. They aim to enact the bill during the session. At a meeting of the suprapartisan National Council on Social Security on Wednesday, a working group of the panel submitted a draft interim report on the matter. The report included the planned consumption tax reduction and opposition parties’ opinions objecting to the tax cut and calling for the early introduction of a cash benefit program instead. Takaichi told the meeting that the government and the ruling bloc would swiftly consider their plan on stopgap measures, such as the consumption tax cut, to be taken before the introduction of a well-designed cash benefit program. The interim report also called for launching an income-pegged benefit program in earnest in fiscal 2029. It will be aimed at easing tax and social security premium burdens on middle- and low-income workers and promoting employment. The report called the program the first step toward creating a refundable tax credit system. Specifically, the benefit program will cover people with earned income above a certain level, and the amount of benefits will vary based on their earnings. It will be designed with the minimum taxable income thresholds in mind so that people’s take-home pay will increase the more they work. “This is of groundbreaking significance,” the prime minister said at the meeting. The ruling and opposition camps were divided on stopgap measures. The LDP-JIP coalition called for the food consumption tax cut as well as a simplified introduction of the income-pegged benefits program, which would provide benefits equivalent to 1 pct consumption tax on food, effectively lowering the tax rate to zero. The ruling parties called for securing financial resources needed to cover the costs to realize the effective zero consumption tax, seen totaling 5 trillion yen a year, by reviewing existing subsidies and special tax breaks, and tapping nontax revenue, rather than issuing deficit-covering government bonds. Details will be formulated late this year, when the government will draw up its draft fiscal 2027 budget, according to the coalition. Of the six opposition parties taking part in the national council, the Centrist Reform Alliance, the Democratic Party for the People and three others opposed this approach, arguing that “benefits that can be offered promptly should be launched in response to ongoing inflation.” The report noted that the two sides were unable to reach a consensus on a specific plan. “Forcing through (the ruling bloc’s plan) would deal a heavy blow to those involved and the economy,” DPFP leader Yuichiro Tamaki told reporters after the meeting. The ruling parties do not hold a majority in the House of Councillors, the upper Diet chamber, making it uncertain whether the bill will succeed after it is submitted. END [Copyright The Jiji Press, Ltd.]