JAPAN CHILD-REARING HOMES MORE BURDENED WITH TAX THAN UNITED STATES,., EUROPE : GOVERNMENT - TOKYO JAPAN

JAPAN CHILD-REARING HOMES MORE BURDENED WITH TAX THAN UNITED STATES,., EUROPE : GOVERNMENT - TOKYO JAPAN

@Jr_Paku Midin Channel

TOKYO

A Japanese government estimate has shown that the proportion of household income spent on taxes and social insurance premiums for Japanese child-rearing households with annual incomes below average is higher than in the United States, Britain, Germany and France.

This data is referenced in ongoing discussions between the government and cross-party lawmakers about introducing a refundable tax credit system for the first time in Japan, which would combine tax deductions and direct cash benefits to ease the burden on low- and middle-income households struggling with rising living costs.

The government presented the estimate at a recent experts' panel under the "national council," which is discussing ways to implement a two-year freeze on the consumption tax on food, followed by a refundable tax credit system. The panel is expected to release an interim report on the proposed measures by this summer.

The calculation was based on a model of a 35-year-old dual-income couple with two children aged 5 and 2 in Japan.

The proportion of social insurance premiums and tax burdens -- such as income tax and consumption tax -- was compared with the average for the four countries. The results showed that the burden is relatively heavier when a couple's combined income falls below the average annual income per person.

Households with children where the couple's combined annual income exceeded the average per capita income had a lower burden ratio than those in Europe and the United States. Similarly, single-person households headed by 25-year-olds also had a lower burden ratio across most income brackets.

The introduction of the tax break and the refundable tax credit system were two of the Liberal Democratic Party's pledges in the Feb. 8 general election, in which the party scored a landslide victory under Prime Minister Sanae Takaichi.

The government has yet to decide how to finance the steps, including filling an expected annual shortfall of 5 trillion yen ($31 billion) in revenues due to the consumption tax break, stoking market concerns about the country's fiscal health, which is already the worst among Group of Seven economies.

A refundable tax credit would combine a tax deduction, a reduction of a person's income tax liability by a set amount, with a direct cash benefit.

If the tax credit exceeds the amount of income tax owed by an individual, the government refunds the difference. The system is seen as especially beneficial for low- and middle-income earners.

Takaichi has previously expressed enthusiasm about freezing the consumption tax by March 2027. However, this schedule appears to be difficult, as retailers and cash register developers say they need at least a year to prepare for a tax rate change, according to hearings held by the council.

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@Jr_Paku Midin Channel