43 Trillion Yen Spent on Defense Costs Over 5 Years
Electronic Cigarettes Taxed 30% Less Than Tobacco
1 Trillion Yen Expected from Tax Increase on 3 Major Items
On the 13th, Sankei Shimbun and Nihon Keizai Shimbun reported that the Japanese government is considering increasing taxes on electronic cigarettes to secure funding necessary for strengthening defense capabilities.
The Japanese government explained at the ruling party's tax council meeting the previous day that it aims to "reduce the tax burden difference between electronic cigarettes and combustible cigarettes and utilize the increased revenue from appropriate taxation as a source of defense funding."
The Japanese ruling party and government plan to raise the tax on electronic cigarettes to the same level as that on combustible cigarettes. Currently, Japan applies a tax burden on electronic cigarettes that is 30% lower than that on combustible cigarettes. Combustible cigarettes are taxed at 304.88 yen (2,761.36 won) per pack, while electronic cigarettes are taxed at 252.67 yen per pack, a difference of about 50 yen.
Nihon Keizai reported that there were opposing opinions within the ruling party regarding the electronic cigarette tax increase. The reason was that combustible cigarettes may have a more harmful effect on the body, so more tax should be imposed on them than on electronic cigarettes to promote public health. However, the Ministry of Health, Labour and Welfare stated that there is no evidence that combustible cigarettes have a more harmful effect on health, and the tax increase plan was brought back to the discussion table.
Tobacco tax is one of the items mentioned by the Japanese government as a target for tax increases along with corporate tax to expand defense spending. The Japanese government plans to raise defense spending, currently at about 1% of the gross domestic product (GDP), to 2% within five years. To this end, it decided to secure 43 trillion yen for defense spending and proposed increasing corporate tax, income tax, and tobacco tax as funding measures. The government expects that if tax increases are implemented on these three items, it will secure more than 1 trillion yen in additional tax revenue by 2027.
Meanwhile, the Japanese ruling party and government also discussed measures to ensure that the tax reduction benefits, scheduled to take effect from June next year, do not go to the wealthy. Earlier, the Kishida Fumio Cabinet announced an economic policy plan last month to reduce taxes by a total of 40,000 yen, including 30,000 yen in income tax and 10,000 yen in resident tax, as part of economic stimulus. However, due to fairness and securing tax revenue issues, the Liberal Democratic Party and its coalition partner Komeito have entered final coordination to exclude those with income exceeding 20 million yen from the tax reduction. If this plan is finalized, Japanese lawmakers with an annual income of 21.9 million yen (about 200 million won) will not receive the 40,000 yen tax reduction benefit per person.
The Japanese ruling party plans to implement the tax reduction for only one year in principle and leave room for additional measures if prices rise.
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