Japan’s ruling parties approved tax reform plans Thursday for fiscal 2017, setting the stage for a review of the spousal tax break system to boost participation by part-timers in the workforce as the economy struggles to gain strength.
The key features of the reform for the year starting in April include raising the income cap for spouse tax deductions, unifying the tax rates on beer and beer-like drinks in stages, and rewarding small and medium-sized companies that raise wages with bigger corporate tax breaks.
The Liberal Democratic Party and its coalition partner Komeito decided to raise the income cap for the spouse tax deduction system to 1.5 million yen ($13,000) or less from the current 1.03 million yen.
Prime Minister Shinzo Abe is encouraging more participation by women in society at a time when the country’s jobs market has shown signs of tightness, especially in the nonmanufacturing sector such as healthcare and welfare as the population is aging.
The change approved by the ruling bloc’s tax panels is designed to counter criticism that the 1.03 million yen threshold is prompting spouses, mostly housewives, to limit their working days and hours.
Under the envisaged system, if the head of a household earns 11.2 million yen or less a year and his or her spouse makes 1.5 million yen or less, 380,000 yen will be deducted from the household head’s taxable income.
The deducted amount will decrease in stages as income increases. It becomes zero when the household head earns more than 12.2 million yen or his spouse gets more than 2.01 million yen.
Economists believe the latest change to the spousal tax deduction system would benefit the retail industry and other service sectors such as hotels and restaurants where the percentage of part-time workers is relatively high.