The Liberal Democratic Party has kicked off discussions on the tax reform for fiscal 2018. On Nov. 27, its research commission on the tax system was debriefed by divisions within the party for their requests at the party’s headquarters. The big win the party clinched in the latest general election has made it easier to discuss the tax reform outline than in typical years, but the Prime Minister’s Office [Kantei] is conspicuously broadening its presence in discussions on each taxation item. Meanwhile, concerns and discontent are growing within the research commission, as it is losing its influence as veteran members have retired from politics.
Commission Chairman Yoichi Miyazawa stressed to reporters on Nov. 27 that the review of benchmarks on the allocation of income from the local consumption tax will be discussed down the road. But the Kantei is eager to review the allocation, as there is a heavy concentration of local consumption tax income in big cities. At a press conference on Nov. 14, Chief Cabinet Secretary Yoshihide Suga noted that “we will redress the uneven distributions of financial sources in a proactive way.”
The tax reform has been long led by the party’s research commission on the tax system. Key members well-versed in taxation have been involved in making political decisions, but since the launch of the second Abe cabinet, the Kantei has taken the helm.
In fact, the Kantei is leading taxation discussions this year too. The government is believed to have already given priority to the creation of a tourism promotion tax (departure tax).” There was no trace of the matter being discussed by the LDP tax commission. This suggests that the opinion of Suga, who advocates making Japan an attractive tourist destination, has been incorporated.
With regards to the income tax reform, the LDP tax commission is considering raising the tax burden on people with an annual income of 8 to over 9 million yen. But the Kantei is proposing a slight increase in the income level for those who will shoulder a tax increase, and the party may be pressed to make a compromise. It also has little choice but to give a green light to Prime Minister Abe’s proposed change in use of income generated from the consumption tax hike. “The reason for the tax commission’s existence will be called into question,” said Seiichiro Murakami, former minister in charge of administrative reform. Discontent is smoldering within the party. (Abridged)