Taxation in Japan
|An aspect of fiscal policy|
Taxation in Japan is based primarily upon a national income tax (所得税) and a residential tax (住民税) based upon one's area of residence. There are consumption taxes and excise taxes at the national level, an enterprise tax and a vehicle tax at the prefectural level and a property tax at the municipal level.
Taxes are administered by the National Tax Agency.
The Liberal Democratic Party government of Masayoshi Ōhira had attempted to introduce a consumption tax in 1979. Ohira met a lot of opposition within his own party and gave up on his attempt after his party suffered badly in the 1979 election. Ten years later Noboru Takeshita successfully negotiated with politicians, bureaucrats, business and labor unions to introduce a consumption tax, which was introduced at a rate of 3% consumption tax in 1989.
In April 1997 under the government of Ryutaro Hashimoto it was increased to 5%. The 5% is made up of a 4% national consumption tax and a 1% local consumption tax. Shortly after the tax was introduced Japan fell into recession, which was blamed by some on the consumption tax increase, and by others on the 1997 Asian financial crisis.
Prime Minister Jun'ichirō Koizumi said he had no intention of raising the tax during his government, but after his massive victory in the 2005 election he lifted a ban on discussing it. Over the following years a number of LDP politicians discussed raising it further, including prime ministers Shinzō Abe, Yasuo Fukuda, and Tarō Asō.
The Democratic Party of Japan came to power in the August 2009 elections with a promise not to raise the consumption tax for four years. The first DPJ prime minister, Yukio Hatoyama was opposed, but Naoto Kan replaced him and called for the consumption tax to be raised. The following prime minister, Yoshihiko Noda "staked his political life" on raising the tax. Despite an internal battle that saw former DPJ leader and co-founder Ichirō Ozawa and many other DPJ diet members vote against the bill and then leave the party, in June 26, 2012, the lower house of the Japanese diet passed a bill to double the tax to 10%. The new bill increased the tax to 8% in April 2014 and 10% in October 2015. Due to Japan's economic situation, the Abe government has decided to delay the tax increase to 10% until April 2017. In 2016, a second postponement was announced, which pushes the increase to October 2019.
There is a spouse deduction that some have argued discourages women from entering the workforce full-time. In Japan, the Wall of 1.03 million yen and 1.30 million yen (103万円・130万円の壁) is a controversial social phenomenon among Japanese housewives due to the government's taxation policy. If a couple's combined income is in excess of 1.03 million yen, with 380,000 yen coming from the spouse, the couple cannot take the marital deduction (配偶者控除). Those who receive an income in excess of 1.30 million yen, with 760,000 yen coming from the spouse, they cannot take the special marital deduction (配偶者特別控除).
As the majority of women participating in the workforce do so only as part-time workers, this acts as a constraint on increasing their personal income past the 1.03 million yen threshold. Thus, there exists a disincentive for wives to work full-time jobs that may affect workforce participation.
It is important to note that according to 2013 Income Tax Guide for Foreigners, income taxation is not explicitly a gendered issue. Quoting this source, "a qualified spouse is defined as one living in the same household as the taxpayer as of December 31st of the year concerned, and whose total amount of income for 2013 did not exceed 380,000 yen. (p. 42)" This means that according to the law, a homemaker is simply someone living in the taxpayer's home whose income does not significantly contribute to the household, regardless of sex. Later in the document, the "qualified spouse" is referred to as "his or her" (p. 43), further emphasizing that the tax law is not intended to discriminate against housewives in particular.
The fact that the "1.03 million yen Wall" has affected women more than men despite lack of gendered language in tax law speaks to the power of social context (and other factors yet determined) in the decisions of the Japanese workforce.
- Brasor, Philip, and Masako Tsubuku, "The rise and fall of property taxes", Japan Times, 3 January 2011, p. 9.
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- , japan-guide.com, 1 April 2014
- 2013 Income Tax Guide For Foreigners, National Tax Agency
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