Japan mulls tax hikes to fund defense spending

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Japan mulls tax hikes to fund defense spending

There are no plans for any immediate hikes, but sources say that corporate tax increases are on the table to help fund the massive defense buildup ordered by the prime minister.

Senior bureaucrats are trying to figure out where they intend to find the extra 17 trillion yen $124 billion to finance the new five-year defense spending plan.

At a meeting on December 7th, top brass from the ruling coalition told top brass they are exploring four main avenues to secure the necessary funds, but they will place priority on three to ease the burden on taxpayers.

They will start by focusing on reforming spending, using unspent funds from other areas, and setting up a new fund to strengthen defense capabilities.

The funds that remain will have to be covered by new tax measures, although officials stated that they do not plan to increase taxes for fiscal 2023.

In fiscal 2027, the last year of the five-year plan, the government officials said they will need to secure 4 trillion yen more than in a normal year.

One official who attended the meeting said the government will likely need to come up with 1 trillion yen for the final year of the plan from each of the four revenue sources.

The Research Commission on the Tax System will not say much about how much taxes will be increased and how much to cover any shortfalls.

The Coalition approved Prime Minister Fumio Kishida's move to raise defense spending to 43 trillion yen over the next five years.

The defense fund will consist of non-tax revenues, money spent by independent administrative agencies, and gains from the sale of government assets, such as Otemachi Place in Tokyo, a twin tower business complex on land where government offices were once located.