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Japan's tax reform to hit affluent pensioners

Tax breaks will be shrunk in multiple ways

TOKYO -- The Japanese government's tax overhaul for fiscal 2018 is expected to hit pensioners with large incomes, with their tax breaks likely to be reduced in multiple ways.

Pensioners can currently claim exemptions no matter how much they may be making. But the deductible amounts will be capped for people with at least 10 million yen ($89,000) in pension income alone, according to a draft reform plan. This would affect about 3,000 people throughout the country.

Furthermore, those earning 10 million yen or more but less than 20 million yen from nonpension sources would find their exemptions shrunk by 100,000 yen, while those earning at least 20 million yen would face cuts of 200,000 yen. About 0.5% of pensioners, or 200,000 people, make 10 million yen or more from outside sources.

Japan last overhauled income taxes in fiscal 1995, and the system has fallen out of pace with changes such as women's advancement in society. The government is positioning fiscal 2018 revisions as the second bullet in a gradual series of medium-term changes, following fiscal 2017 changes to exemptions for working spouses.

The fiscal 2018 plan targets a net increase of 100 billion yen from income taxes overall and would take effect as early as January 2020.

The government also seeks to increase the basic deduction for all taxpayers, while decreasing the earned-income deduction for company workers. These moves are geared to raise taxes for employees making more than a certain amount, while lightening the burden on freelancers and other contract workers.

People are increasingly working outside of companies thanks to the internet age. Contract workers have grown unsatisfied with how the income deduction appears to benefit corporate workers more, and the government aims to address the disparity.


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