TOKYO : Japan’s ruling party on Thursday approved a plan that steered clear of major new taxes on carbon and capital gains, in a sign Prime Minister Fumio Kishida may struggle to win consensus on contentious issues like climate change and wealth distribution.

Japan will swiftly consider steps on capital gains tax from derivative trading to avoid tax evasion, a final draft annual tax reform plan for the next fiscal year obtained by Reuters showed.

The draft plan, which was set for formal approval by the LDP and its coalition ally Komeito on Friday, also called for “technical consideration” of policy mix to achieve carbon neutrality.

“There’s no big game changer in next year’s tax reform plan,” said Takuya Hoshino, senior economist at Dai-ichi Life Research Institute.

“Financial tax reform debate did not make a headway due to concerns about its impact on stock market at a time of corona shock. And carbon neutrality talks faced a stiff resistance from business circles worried about potential burdens,” he said.

As such, the tax debate at this time focused on tax breaks for companies that raise wages.

But analysts doubt one-off tax deductions could prompt cautious Japanese firms to move to increase fixed labour costs by raising wages.

(Reporting by Tetsushi Kajimoto and Kaori Kaneko; Editing by Chang-Ran Kim)

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