Amid the lingering effects of this infectious disease, it is important when revising the tax system to pay attention not only to shoring up the present-day economy, but also to implementing measures that will lead to economic growth in the future.
The Liberal Democratic Party's Research Commission on the Tax System has started discussions to draw up the ruling parties' outline of tax system reform for fiscal 2021. The panel intends to compile the outline in mid-December.
"The nation's economy is in dire straits and unpredictable circumstances will continue. We will discuss the matter while taking that into account," said Akira Amari, chairperson of the LDP tax panel, expressing his intention to prioritize support for households and companies that are struggling due to the spread of the novel coronavirus.
It is reasonable to make efforts to reduce the burden related to the tax system, as well as provide cash benefits.
One of the pillars of tax system reform for next fiscal year will be tax breaks for automobiles.
A specific option is to extend the expiration dates next spring for the reduction in the environmental performance tax, which is imposed based on fuel efficiency when an automobile is purchased, and the tax cuts for eco-friendly cars, which reduce the automobile weight tax for eco-friendly automobiles.
This measure is aimed at reducing the burden on automobile owners and promoting the spread of eco-friendly vehicles. It is hoped that these tax breaks for automobiles will lead to a recovery of sales while enhancing the effectiveness of measures against global warming.
How to deal with housing loan tax breaks, which have been expanded as a result of the consumption tax rate hike, will be a key theme in the discussions. As a special measure against the coronavirus, the requirement that people move in by the end of 2020 in order to receive a housing loan tax reduction has been extended to moving in by the end of 2021. However, economic circles have been calling for a further extension of the deadline.
Home purchases are said to have a large ripple effect on consumer goods and other products. Housing starts are slumping due to the effects of the coronavirus disaster, and it is hoped that housing purchases will stimulate demand.
The appraised value of land, which is the basis for the fixed asset tax, is reviewed once every three years. This year marks the review of appraised values. The amount of the tax is based on official land prices as of Jan. 1 this year, when land prices continued to rise. Therefore, there are concerns that a too-heavy tax burden will be levied mainly on commercial land.
It is necessary to study concrete measures and make efforts to levy taxes in line with actual conditions.
Regarding the tax system to encourage economic growth, measures to promote corporate digital investment will be a focal point in the discussions. It is an effective option to reduce the corporate tax for companies that make efforts in this regard, such as creating an environment for cloud data management through which data can be exchanged over the internet.
Because companies, government ministries and agencies, and other entities in Japan have developed their own information technology systems, cooperation between them has not progressed in this field. Widespread use of cloud computing will make it easier to share data and create new businesses using artificial intelligence and other devices.
The panel also plans to discuss taxation and other measures to encourage small and midsize companies to reorganize themselves, such as through mergers. The panel needs to create an effective system to improve productivity and strengthen international competitiveness.
The nation's fiscal condition is deteriorating rapidly. For the present, priority should be placed on measures to boost the economy, but discussions for fiscal reconstruction must also not be forgotten.
-- The original Japanese article appeared in The Yomiuri Shimbun on Oct. 22, 2020.
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