Japan Govt May Fully Cover Local Losses from Consumption Tax Cut
The Japanese government is planning to use special tax revenue grants to fully compensate local governments for revenue losses caused by a proposed consumption tax cut. The plan also includes a new benefit program to effectively lower the tax on food to zero for two years starting in 2027.
Why it matters
This policy shift demonstrates how central governments manage fiscal decentralization and economic stimulus measures during periods of tax reform.
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.
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