The government plans measures to soften the impact of the first major tax increase in 17 years on low-income families and may lower tax rates on food and other daily necessities.
The Lower House on June 26 passed legislation to raise the consumption tax rate to 8 percent in April 2014 and 10 percent in October 2015.
It will be the first major tax hike since the consumption tax was increased to the current 5 percent in April 1997.
According to estimates by Dai-Ichi Life Research Institute, the annual tax bill will increase by 120,000 yen ($1,500) for a four-person family with an annual income of 5 million to 5.5 million yen when the rate is raised to 10 percent.
The estimates are based on the assumption that the husband or wife is working and that the couple has two children.
The government will distribute cash to low-income families when the rate is increased to 8 percent. It will consider cutting the income tax or distributing cash again when the rate is raised to 10 percent.
The government will also consider introducing a lower tax rate for food and other daily necessities from April 2014.
The government plans to take measures to offset part of the tax hike for two big-ticket items. It will consider lowering automobile-related taxes and expanding tax cuts for homebuyers who take out loans.
The government expects that an additional 13.5 trillion yen will flow into national coffers annually after the rate is increased to 10 percent.
Of the total, 10.8 trillion yen will be used to maintain the current social security framework, including government payments for the basic portion of the public pension system.
The remainder will be allocated for new social security programs, such as increasing nurseries, kindergartens and other child-care facilities to help working mothers.
As for the public pension system, the minimum subscription period required for receiving payouts will be reduced from 25 years to 10 years in October 2015.
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