Controversy Erupts: Japan’s Flat-rate Tax Reduction vs. Mandatory Salary Disclosure

Has there ever been such a poorly received tax reduction before?

The government has mandated companies to disclose the amount of income tax reduction on payslips starting from June, as part of the flat-rate tax reduction scheme. This announcement came suddenly through the media, leading to confusion in the field.

The flat-rate tax reduction amounts to ¥30,000 per person for income tax and ¥10,000 for resident tax, totaling ¥40,000 annually. For example, in a household with a husband, a stay-at-home wife, and two children in elementary or middle school, the reduction would amount to ¥160,000.

To ensure residents feel the tax reduction in resident tax, the government has set it to “¥0” and subtracted the reduction amount from the annual resident tax, spreading the resulting amount over 11 months of payments. This calculation places a burden on private companies, as the government is essentially selling favors to them.

We spoke with Hiroyuki Kaji, representative of the tax accountant firm “KAJI Group.”

“The number of inquiries from businesses regarding the calculation method for the flat-rate tax reduction has increased significantly. Companies must accurately understand their employees’ dependents and calculate the deduction amount accordingly to reflect it on the payslip.

Any errors in the calculation on the payslip can affect employees’ lives, and there is a possibility of complicated errors like double deductions. The flat-rate tax reduction isn’t an annual occurrence, yet businesses are burdened with updating their calculation software. This has caused confusion and placed a heavy burden on private companies.”

However, according to Kaji, the announcement of this mandate didn’t come abruptly just a month ago. The National Tax Agency issued a notice on February 5th of this year.

The National Tax Agency has published a guide titled “Q&A on Flat-rate Tax Reduction for the Year 2024,” which includes the following statement,

“In the payroll statement, please include the amount of monthly reduction deducted, such as ‘Flat-rate Tax Reduction Amount (Income Tax) ¥×××,’ ‘Flat-rate Tax Reduction ¥×××,’ etc., as appropriate.”

“Even if such documents are casually announced on the National Tax Agency’s website in PDF format, few busy executives would notice. Even among us in the media, we didn’t know until some newspapers reported it. Since opinion polls from various broadcasters were likely announced about 20 days ago, it’s highly probable that government officials intentionally leaked information to the media afterward.

It was foreseeable that there would be significant backlash from the public, especially from executives, due to the complexity of the procedure. If announced before the opinion polls, it could lead to a situation where the voices of bullying of employers become louder, potentially causing a further decline in the government’s approval ratings.” (TV station personnel)

Naturally, many employed company workers would be pleased if taxes were not deducted from their payslips. Balancing the scales between employers and employees, the decision was made to impose burdens on employers.

However, on social media,

“What are they even complaining about for just a measly ¥40,000 tax reduction? How much do they think prices have risen?”

“They probably just switched from benefits to tax reductions because they were upset about being called ‘the tax-increasing spectacles’!”

There are many harsh opinions directed towards Prime Minister Kishida.

Perhaps they wanted to emphasize “Kishida the Tax Reducer,” but it seems quite challenging to grasp the sentiment of the people.