まゆの部屋

Tax hikes on the horizon / Smokers, average households will pay more nextyear
Shigeki Kurokawa and Takao Kuroi / Yomiuri Shimbun Staff Writers

The ruling coalition's tax reform outline for fiscal 2006 announced Thursday will increase the financial burden on households as a number of tax hikes are included in the outline, while the fixed-rate temporary tax reductions are to be abolished.

The coalition is seeking the abolition of the fixed-rate reductions on income tax and individual residence tax in 2007. The fixed-rate temporary tax reductions, introduced in 1999 to stimulate the sluggish economy, will be halved in 2006.

As a result, a household consisting of a salaried worker, a full-time housewife and two children aged between 16 and 22 with an annual income of 7 million yen will pay 41,000 yen more in income and resident tax in 2006 and double that amount in 2007.

With the forthcoming 3 trillion yen transfer from the central government to local governments of the authority to collect tax, individual resident tax rates will be unified at 10 percent, while income tax rates will be divided into six categories from the current four. These revisions will be made in connection with the triple reform of local government finances.

As a result, a household with an annual earned income of 7 million yen will pay 97,500 yen less income tax, but will pay the same amount more in resident tax. This means the average household's overall tax burden will not change.

Smokers will have to pay more taxes, starting July 1.

The tobacco tax will increase 0.85 yen per cigarette, and as a result, the retail price will increase 1 yen per cigarette. A packet of the popular Mild Seven brand will cost 290 yen per pack instead of the current 270 yen.

"Cigarette prices should increase further so that people who want to quit smoking will be encouraged to do so," Prime Minister Junichiro Koizumi said Thursday. "It's good for [people's] health, and it will lead to increased tax revenue."

Cigarettes are bound to remain the subject of tax increase debates even after the forthcoming hike.

Drinkers were paying careful attention to changes in the liquor tax. Tax on so-called third-category beer will increase by a maximum of 3.8 yen per 350 milliliters. A case of 24 350-milliliter cans will see a retail price increase of about 100 yen. On the other hand, regular beer will receive a tax cut of only 0.7 yen per 350 milliliters. There will be a 6.9 yen tax increase on a 720-milliliter bottle of wine, while sake will receive a 14.8 yen tax cut on a similar-sized bottle.

In the tax reform outline, the coalition has proposed a number of tax breaks for earthquake countermeasures for houses and buildings. This is partly in response to recent earthquakes occurring off Fukuoka and Miyagi prefectures.

This new tax break to promote quake-proof house renovation will allow 10 percent of the renovation cost, to a maximum of 200,000 yen, to be income tax deductible. However, this will only apply for renovation work carried out between April 2006 and December 2008 on houses built before the 1981 revision of the Building Standards Law.

The property tax on houses remodeled with antiseismic features will be halved for up to three years.

Earthquake-resistance work on a single house costs between 1.5 million yen and 2 million yen, on average. A tax deduction system for earthquake insurance also will be established. Under the new system, the earthquake insurance premium can be deducted to a maximum of 50,000 yen from income tax and a maximum of 25,000 yen from resident tax. The coalition aims to promote earthquake insurance, which currently only 20 percent of house owners possess.

(Dec. 17, 2005)