``Reference'', ``Undecided'', unusual deliberation on consumption tax reduction bill, funding and benefits

The consumption tax reduction bill entered deliberation on the 20th in an unusual manner that did not specify important items such as financial resources, income-linked benefit targets, and payment amounts. Prime Minister Sanae Takaichi has touted the effects of the policy, saying things like ``increasing take-home pay,'' but has so far only explained specific plans as ``reference.'' It is unclear how much detail will be revealed in the lead-up to the bill's enactment.

Prime Minister Takaichi does not provide details of financial resources or benefits; consumption tax reduction bill begins deliberation in the House of Representatives

Regarding the number of people eligible for benefits, the Prime Minister pointed out that the figure of about 20 million is ``one reference,'' given that the three countries that have adopted similar systems, the United States, the United Kingdom, and France, only apply to about 30% of active workers. He explained that this applies to people with annual incomes of 1 million to 3.5 million yen.

The benefit system, which will be introduced in advance along with the consumption tax cut, will be funded by 600 billion yen a year, equivalent to a 1% tax rate. Therefore, the average amount paid per person is 30,000 yen per year.

Regarding the benefits, which will be fully introduced in fiscal 2029 after the end of the two-year tax cut, the Prime Minister emphasized, ``Most eligible people will receive support that will exceed the effects of the tax rate reduction.'' The benefit of the mechanical tax cut is 36,000 yen per person, which also serves as a guideline for the amount of benefits.

International comparisons of the ``net burden rate,'' which is calculated by subtracting benefits such as child allowances from the burden of taxes and social insurance premiums, are also expected to be reflected in the design of eligible people and benefit amounts. For households with a couple and two children, the net burden rate for households with an annual income of 5.1 million yen or less is higher than the average of the three countries: the United States, Germany, and France. The difference in net burden amount is up to 270,000 yen per year.

Meanwhile, the financial resources for the tax cuts and benefits, which require 10 trillion yen over two years, will be generated through special tax measures, subsidies, and a review of funds, which Finance Minister Satsuki Katayama has declared to be ``stepping up the gears.''

In addition, consideration will be given to increasing non-tax revenue, utilizing surplus funds in the special account for foreign exchange funds, and reviewing the 3 trillion yen measure against high prices that was included in recent supplementary budgets. The increase in tax revenue, which has exceeded an average of 6 trillion yen over the past five years, is also a candidate, but the details have not been disclosed.

However, the Takaichi administration plans to spend a large amount of money on increasing defense spending and investing in growth next fiscal year. There are many uncertainties regarding the amount of these budgets and the securing of financial resources, with a senior Ministry of Finance official saying, ``We won't be able to reveal the specifics of financial sources and benefits such as consumption tax cuts until next year's budget is decided at the end of the year.''