Takes and Gives in Tax Discussion

The Liberal Democratic Party (LDP), Komeito and the Democratic Party for the People (DPP) agreed on raising the threshold of “Wall of 1.03 Million Yen.” It is still unclear at which point new “wall” will be set. However, the DPP accepted LDP’s offer to make deal. The three parties exchanged a document of the agreement. The DPP took one step forward to the leading coalition.

“Wall” means a limit of annual income at which a worker would not work anymore. When annual income of a worker exceeds 1.03 million yen, income tax will be imposed on him/her. The DPP argued that the threshold should be raised for the workers to earn more without paying income tax. The LDP and Komeito has been reluctant to raise the threshold, being afraid of shortage of tax revenue from the perspective of governmental authority of taxation, in other words Ministry of Finance.

 

However, the LDP and Komeito accepted consistent demand of the DPP. The leading coalition does not have majority power in the House of Representatives after the defeat in the general election in October. It is necessary for the coalition to get approval on any bills from the DPP. The agreement marked the first example for those three parties to reach a deal to pass a bill.

 

The agreement stipulated that the threshold of 1.03 million yen will be raised with annual discussion on taxation. It also referred to defrost subsidy for gasoline, which the DPP also insists on, requiring the government to discuss and conclude in the negotiation on taxation related to automobiles.

 

However, the document they exchanged was not as specific as determining at how much million yen new threshold be set. “The LDP, Komeito and the DPP accumulated five meetings for a comprehensive economic stimulus plan. The LDP and Komeito have dealt with requests from the DPP as much as possible, and sincerely take them in the process of implementation, coordinating with the government,” the agreement describes. The document also requires the parties to cooperate for passing the supplemental budget bill as early as possible.

 

While the DPP upheld a policy to raise the threshold as high as 1.78 million yen, it is recognized in the government that the target is too high, considering that the setting threshold at 1.78 million yen will cause revenue shortage of 7 to 8 trillion yen. Prefectural governors opposed DPP’s idea, being afraid of reduction of subsidy from the national government to the local ones. It is possible that the threshold will be set at very small rise from 1.03 million yen.

 

So, here is a balance sheet. The DPP gained rise of threshold of income tax and gasoline subsidy. The LDP and Komeito achieved assured approval on budget bill from the DPP, which is necessary to implement all the policies included in the budget bill, with sacrifice of maintenance of the wall of 1.03 million yen. If this system becomes a template of trilateral policy discussion, the LDP can expect DPP’s approval on annual budget bill in the ordinary session in next year. This is a traditional maneuver for the LDP to deal with minority government.

Comments

Popular posts from this blog

Amendment of Local Autonomy Law

Request for Final Nuclear Disposal Site

Not A Royal Wedding