TOKYO

The fiscal 2020 tax system overhaul package adopted by Japan's ruling bloc Thursday fails to include sweeping reforms linked to the everyday life of people and only brings into discussion minor reforms.

The package sees some progress as it expands single-parent tax breaks to cover unmarried people and offers tax incentives for spurring large firms' investment in startups. But such changes come at the expense of more fundamental reforms, such as reviewing the income tax system to correct wealth disparity.

The administration of Prime Minister Shinzo Abe, who is now in the third-straight and final three-year term as president of the ruling Liberal Democratic Party, raised the consumption tax rate to 10 pct from 8 pct in October, after postponing the move twice.

But it still has a long way to go before achieving fiscal soundness, at a time when social security costs are ballooning due to the country's aging population.

Nevertheless, debates on additional consumption tax hikes have been deferred as the current four-year term for members of the House of Representatives entered its second half in October, raising the possibility of the all-important lower chamber of the Diet, Japan's parliament, being dissolved for a snap general election.

In the lead-up to the July election for the House of Councilors, the upper chamber, Abe said that a consumption tax rate hike after the increase to 10 pct "would be unnecessary for the next 10 or so years."

After the 2-percentage-point increase in October, the tax panels of the LDP and its coalition partner, Komeito, avoided talks on possible additional consumption tax hikes.

Instead, the reform package features tax cuts amid the Lower House breakup speculation.

Drastic reforms to fix inequality are glaringly absent from the package.

In the income tax reform under the fiscal 2018 tax system overhaul package, the government decided to raise the amount of the basic deduction applied to all taxpayers and cut the amount of the additional deduction for salaried workers, with the measures set to take effect next month.

Keio University Prof. Takero Doi criticized the income tax revamp.

"The review of deductions that are beneficial to high income earners isn't enough, and more discussions are needed to revive the redistributive function (of income tax)," he said.

While measures to prop up the economy were the focus of discussions a year ago, ahead of the 2-point consumption tax hike, there was more leeway this time for the ruling coalition to consider medium- to long-term issues, such as inequality, Doi noted.

"But discussions on fixing inequality did not happen," he said.

Jiji Press