Japan's Wealth Tax Increase: Stricter Taxation on High-Income Earners with Annual Income of 3 Billion Yen

Tax Burden Rate Increases from Annual Income of 100 Million Yen
Tax Burden Rate Rises 2-3% When Earning 5 Billion Yen
Japanese Media "Effectiveness of Income Inequality Resolution Questioned"

Japanese Prime Minister Fumio Kishida
[Photo by Yonhap News]

[Asia Economy Reporter Lee Ji-eun] The Japanese government and the ruling Liberal Democratic Party (LDP) have moved to expand the tax burden on the wealthy with an annual income exceeding 3 billion yen (approximately 28.4376 billion KRW).

According to the Nihon Keizai Shimbun on the 13th, the LDP plans to include a tax increase proposal targeting the wealthy with an annual income of 3 billion yen in this week's tax reform plan.

Miyazawa Yoichi, chairman of the LDP's tax research committee, explained to reporters that "high-income earners will bear a certain average burden," and that the tax target was set at 3 billion yen as a consideration for the market.

If the new tax increase proposal is implemented, individuals with an annual income of 5 billion yen will see their income tax burden rate increase by 2-3% compared to the current rate. The tax is calculated by excluding 330 million yen from the total income and then applying a tax rate of 22.5%. The LDP plans to apply the new tax system from 2025 after a preparation period for income tax reform.

The LDP introduced this improvement plan because it judged that the current tax structure, where high-income earners pay less tax than low-income earners, is problematic. According to data released by the Japanese Ministry of Finance last October, the income tax and social insurance burden rate for the income bracket of 50 million to 100 million yen reached 28.7%, making it the highest tax burden compared to other brackets. In contrast, the 500 million to 1 billion yen bracket had a burden rate of 21.5%, and the 5 billion to 10 billion yen bracket had 17.2%, showing a trend where the tax burden rate decreases as income increases.

This phenomenon, where the tax burden rate decreases once annual income exceeds 100 million yen, is called the "100 million yen wall" in Japan. Unlike salaries, where taxes increase with income, a flat tax rate of 15% is uniformly applied to gains from stocks, land, and building sales, causing this reversal phenomenon.

Earlier, Japanese Prime Minister Kishida Fumio pledged to break the "100 million yen wall" during last year's LDP presidential election to address this issue. However, after proposing a taxation policy on financial income as an alternative, the pledge was postponed due to a decline in stock prices.

Foreign media in Japan predict that even if the new tax increase proposal is implemented, it will not have a significant impact on resolving income inequality. The Asahi Shimbun reported, "The wealthy with an annual income exceeding 3 billion yen, who will be subject to additional taxation, number only 200 to 300," and added, "There are voices within the LDP that the tax target is too narrow, so the tax threshold may be lowered further."

This content was produced with the assistance of AI translation services.