Japan to Implement Income Tax Hike for Defense Spending in 2027
Japanese government and ruling parties decided Thursday (December 18) to implement a planned income tax hike in January 2027, as part of efforts to secure funding for increased defence spending.
- Japan will implement an income tax hike in 2027 to help fund increased defense spending.
- The tax increase is part of a larger plan to secure over 1 trillion yen, which also involves raising corporate and tobacco taxes.
- The income tax hike will be a 1% surcharge, but it will be offset by a 1% reduction in the existing special reconstruction tax.
- Although the annual tax burden will remain unchanged, the collection period for the special reconstruction tax will be extended to generate the new funds.
The decision, which will be included in the ruling bloc's fiscal 2026 tax system reform outline, was made at a meeting of the tax panel heads of the Liberal Democratic Party and the Japan Innovation Party (Nippon Ishin no Kai).
"In light of the current severe security environment, we will make steady efforts," Satoshi Umemura of the JIP told reporters after the meeting.
Over funding for higher defence spending, the fiscal 2023 tax system reform outline included plans to secure over 1 trillion yen in fiscal 2027 by implementing corporate, tobacco and income tax hikes in stages over several years.
The fiscal 2025 outline set the corporate and tobacco tax hikes for April 2026.
Regarding the income tax hike, the ruling bloc decided to impose a 1-pecentage-point income tax surcharge while reducing by 1 point the existing special income tax rate for reconstruction following the 2011 major earthquake and tsunami in northeastern Japan.
This measure will leave the annual income tax burden unchanged, but the period for collecting the reconstruction special tax will be extended.
The JIP had previously opposed it.
[Copyright The Jiji Press, Ltd.]
