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Business leaders welcome ruling bloc’s car, home tax reform plan

apanese business leaders welcomed Friday the ruling coalition’s approval of a tax reform package for fiscal 2019 that features tax breaks for people with mortgages and those purchasing new cars.


But some in the business community questioned the impact the plan will have on Japan’s already strained fiscal health.


“An appropriate step has been taken,” Hiroaki Nakanishi, chairman of the Japan Business Federation, said in a statement after Prime Minister Shinzo Abe’s Liberal Democratic Party and coalition partner Komeito party agreed on the draft tax package earlier in the day.


“We will actively cooperate so that the Japanese economy will not slow significantly when the consumption tax is raised” from the current 8 percent to 10 percent in October next year, Nakanishi said.


The package, compiled in an attempt to underpin demand after the consumption tax hike, includes an open-ended annual tax cut of a maximum 4,500 yen ($40) for purchasers of new cars, while people who take out home mortgages between Oct. 1, 2019, and the end of 2020 will have their access to a tax reduction scheme extended from a 10 year period to 13 years.


“It is the first time in nearly 70 years since its creation in 1946 that there has been a breakthrough in automobile tax,” said Akio Toyoda, chairman of the Japan Automobile Manufacturers Association.


The tax reforms “will greatly promote the alleviation of the burden on automobile users who are taxed extremely heavily in comparison to other countries for owning vehicles,” said Toyoda, president of Toyota Motor Corp.


Yoshimitsu Kobayashi, chairman of the Japan Association of Corporate Executives, said he looks on the tax reform package “positively” but urged the government to clarify the total fiscal burden the measures will inflict when implemented.


The government should “explain to the public the cost-effectiveness of the various measures (in the tax reform package) and how they are compatible with the goal of improving fiscal health,” Kobayashi said.


Akio Mimura, chairman of the Japan Chamber of Commerce and Industry, also demanded the government steadily implement social security reforms, in addition to steps to deal with the consumption tax hike.


“The most important thing is that the government creates an environment where small and medium-sized businesses can feel comfortable in passing on the consumption tax hike on their products,” he said.


The latest tax reform package will be the basis for legal revisions to be submitted to the ordinary Diet session beginning in January.

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