Japan Govt to Adopt Package Including Food Tax Cut Later Tues.

Tokyo, Sept. 15 (Jiji Press)–The Japanese government at an extraordinary cabinet meeting Tuesday afternoon is set to adopt a tax system reform package featuring a temporary consumption tax cut for food and an income-linked benefit program. Under the package, the consumption tax rate on food will be lowered from the current 8 pct to 1 pct for two years starting next April, and the program to provide low- and middle-income workers with benefits equivalent to the remaining 1 pct tax rate will be in place for the two years on a provisional basis to effectively lower the food consumption tax to zero. The benefit program will be introduced on a full scale in April 2029, when the food consumption tax rate is slated to return to 8 pct. The government aims to submit related legislation to an extraordinary session of parliament expected to be convened early next month. If realized, the consumption tax cut would be the first since the levy was introduced in 1989. The package stipulates that special transitional measures related to the consumption tax cut will be taken, such as exempting businesses from an obligation to display tax-inclusive prices for two months before and after the tax rate change. It also features benefits for farmers, fishers and others who would be affected by the tax cut, as well as support measures for operators of eating and drinking establishments for diversification, such as take-out items with a 1 pct tax rate. The government plans to secure a total of some 10 trillion yen needed over the two years for the food tax cut and the benefit program through reviews of subsidies and special tax breaks, without issuing deficit-covering bonds. Details will be worked out by the end of this year. The proposed income-linked benefits will be paid every autumn. In fiscal 2029, when the food tax rate is slated to return to 8 pct, payments will be made twice, in April and autumn. Specific benefit amounts and the scope of recipients will be discussed going forward. The central government will shoulder at least two-thirds of the benefits while offering financial aid to local governments to help them cover the rest. The national government will fully cover declines in local governments’ revenues stemming from the food consumption tax cut. The suprapartisan National Council on Social Security failed to reach an agreement on lowering the consumption tax rate, due to differences between the ruling and opposition parties. The central government approved the tax reduction at a cabinet meeting last month. END [Copyright The Jiji Press, Ltd.]