Japan Ruling LDP OKs Food Consumption Tax Cut Plan

Tokyo, Sept. 11 (Jiji Press)–Japan’s ruling Liberal Democratic Party on Friday approved a tax system reform package featuring a food consumption tax cut plan and an income-linked benefit program, with the package expected to receive cabinet approval on Tuesday. The package was approved at Friday’s joint meeting of the LDP’s Research Commission on the Tax System and Research Commission on Social Security System. The government hopes to submit a related bill to an extraordinary session of parliament expected to be convened this autumn, after the proposal secures cabinet approval next week. Before the meeting, the central government held discussions with local governments on the latter’s burden from the proposed tax cut and benefits. The local government side accepted the measures to be included in the package and agreed to continue discussions on further details. The proposal features a plan to reduce the consumption tax rate on food from the current 8 pct to 1 pct for two years from next April and another plan on an early introduction of a program to provide low- and middle-income workers with benefits equivalent to the remaining 1 pct tax rate to effectively lower the food consumption tax to zero. The benefit program will be introduced on a full scale in April 2029. Benefits will be paid every autumn. In fiscal 2029, when the food tax rate returns to 8 pct, payments will be made twice, in April and autumn. The central government will cover more than two-thirds of the financial burden associated with the benefit program, with the remainder split equally between prefectural and municipal governments. The burden on local governments will be covered mainly by local allocation tax grants. Municipalities that do not receive such funds will be provided special grants for the time being. At Friday’s discussions, the central government told local government officials that it will consider completing preparations for benefits provided in April 2029 by February the same year after deciding the actual amount of the benefits in advance, due to April being a busy month in terms of local government affairs. Speaking to reporters after the discussions, Nagano Governor Shuichi Abe, president of the National Governors’ Association, said, “While there are still many unresolved issues, we’ve decided to cooperate, with the utmost reluctance.” He added that future discussions should be conducted carefully. END [Copyright The Jiji Press, Ltd.]