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ECONOMY

Strong likelihood that spousal tax deduction will remain in place

  • October 6, 2016
  • , Mainichi , Lead story
  • JMH Translation

Review of the spousal deduction is a key focus of discussions on tax system revisions for fiscal 2017. It is very likely that introduction of a “standard deduction for couples,” the alternative being considered to replace the spousal deduction, will be postponed. It is anticipated that it will be hard to develop a “couple’s deduction” scheme as the public will likely react poorly because many households would be subject to tax increases under such a scheme. As a result, more and more members of the government and ruling parties are shifting toward taking a cautious approach. A proposal has arisen within the government to expand the scope of application of the current spousal deduction by raising the upper limit on the spouse’s annual income. It looks like discussions on the review of the spousal deduction will proceed along the line of expanding its scope of application. (Abridged)

 

 

Standard deduction for couples

Proposal to raise the annual income limit used in the spousal deduction

Merits

  • Encourage women’s participation in society· 
  • Broadly support couples
  • Removing the “1.03 million yen a year” barrier will promote women’s employment
  • Can minimize the number of households that will see a tax increase

Concerns

  • Chance that it would increase tax on many households, including high-income earners
  • Could create a new barrier as it would only support part-time worker households
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