Japan Govt May Fully Cover Local Losses from Consumption Tax Cut

Tokyo, Sept. 5 (Jiji Press)--Japan's government is considering a plan for the expected income falls at local governments from a proposed consumption tax cut to be fully covered with special tax revenue grants from the state, it was learned Saturday.

The national government is expected to present the plan at a meeting with local governments to be held shortly, along with an idea to use ordinary tax revenue grants to compensate local governments for necessary expenses linked to a proposed income-pegged benefit program.

The special grants program is designed to offset temporary dips in local government tax revenues due to changes in central government policies.

For the cash benefit scheme, the national government will propose that it shoulder at least two-thirds of necessary expenses and that the remainder be split evenly between prefectural governments and municipalities.

Japan aims to introduce the benefit program in earnest in fiscal 2029. As a transitional measure until then, the national government is seeking to reduce the consumption tax rate on food from 8 pct to 1 pct for two years from fiscal 2027, which starts next April. The benefit program is planned to be partially introduced to pay out the equivalent of the remaining 1 pct tax rate to effectively lower the food consumption tax to zero for the two years.

[Copyright The Jiji Press, Ltd.]