Japan mulls tax break for companies raising wages

The government is considering granting a tax break for companies which raise salaries of all employees, including new and non-regular workers.
By: | November 29, 2021

The requirement for the tax break is expected to be included in tax system reforms for fiscal 2022, with the outline for such measures to be released in early December.

Under the current system, a company that implements a certain level of wage hikes is eligible for a deduction of around 15% of the wages it pays from the final tax amount.

For companies that increase their spending on training from the previous fiscal year, additional tax deductions are applicable. As such, major companies can be eligible for tax cuts of up to 20% and small firms for cuts of up to 25%.

Komeito, the junior partner in the ruling coalition with the Liberal Democratic Party (LDP), is calling for up to 30% in tax deductions under the new system.

Yoichi Miyazawa, LDP’s tax policy chief, is seeking to limit the tax benefits to when firms raise base wages, while the business world is calling for a tax break for increases in total wages paid, including bonuses.

READ: Wage increase in Japan still suppressed by pandemic

The tax break system for companies raising employees’ wages started in fiscal 2013. Prime minister Fumio Kishida plans to drastically review the system as part of his strategy for promoting wealth distribution, according to Japan News.