Japan begins tax increases to bankroll record US$8 billion military build-up

A launcher for an upgraded Type 12 land-to-ship guided missile is displayed at the Ground Self-Defence Force’s Camp Kengun in Kumamoto prefecture.

Photo: Kyodo Japan on Wednesday raised tobacco and corporate taxes to finance a boost in defence spending, with income tax hike set to follow in 2027 as the government projects the tax increases will add some 1.3 trillion yen (US$8 billion) annually in revenue.

As the security environment surrounding Japan deteriorates and the government is set to further strengthen the country’s defence capabilities, the public is likely to face further tax burdens to finance the outlays, which have now ballooned to a record-high 9 trillion yen a year.

From Wednesday, the government added a surtax of 4 per cent after deducting 5 million yen from the corporate tax amount.

The measure, estimated to raise tax revenues by 869 billion yen, will exclude small and midsize businesses with small incomes.

For heated tobacco products, the government is implementing a two-stage tax hike starting on Wednesday and again from October, aligning them with the rate for conventional cigarettes, which is currently higher.

Smokers congregate at a designated smoking area in Tokyo.

Photo: EPA-EFE It will then raise the tax rate for both heated and conventional cigarettes from April 2027 in three stages, hiking it by 0.5 yen per stick.

The increases are set to expand tax revenues by 212 billion yen.

As for income tax, the government will charge an extra 1 per cent from January 2027 to secure 256 billion yen.

However, that increase will be offset by a 1 per cent reduction in a special income tax currently levied at a rate of 2.1 per cent to fund reconstruction efforts following the March 2011 earthquake and tsunami.

But the total financial burden on the public will ultimately grow as the taxation period for the special income tax for reconstruction will be extended.

The series of defence-related tax increases was decided in response to a new security strategy compiled in December 2022, that includes a plan to cover 1 trillion yen annually by hiking taxes.

A record 9 trillion yen was earmarked for defence spending for the 2026 financial year, which marks the fourth year of Japan’s five-year 43-trillion-yen defence build-up plan.

Prime Minister Sanae Takaichi has been eager to raise defence and related spending, vowing to revise three security documents by the end of this year.

F-15 fighters from Japan’s Air Self-Defence Force take part in

原文链接: 南华早报