Will reviewing spousal tax deduction help boost role of women in society?
The government’s Tax Commission has started discussing a review of the tax deduction system for spouses, which is aimed at reducing the burden of income and resident taxes on taxpayers with spouses.
To help expand the role of women in society at a time when the working generation is shrinking due to the ongoing trend of a low birthrate and a rapidly aging population, a comprehensive range of reforms in many areas is required. Changes to the tax system alone will not be sufficient.
Prime Minister Shinzo Abe has made helping women to play a more important role in society a key element of his economic growth strategy. “We should review the tax system, which restricts women’s employment,” said Abe, who has instructed relevant government bodies to reexamine the deduction system. We think this is a fair response to the changing times.
Under the current spousal tax deduction system, the main household income earner can deduct ¥380,000 from their annual taxable income if their spouse is a full-time homemaker, or works part-time and earns ¥1.03 million or less per year.
Many companies reduce their spousal allowance and other allowances paid to employees at the ¥1.03 million threshold. Consequently, housewives working part-time tend to arrange their working hours to ensure they do not earn more than ¥1.03 million.
If a wife earns more than ¥1.03 million but less than ¥1.41 million, her husband can still claim a special spousal deduction. However, it is a fact that the “¥1.03 million wall” limits women's desire to work.
The spousal tax deduction was introduced in 1961. Its objective was to provide tax relief to typical households at the time, in which the husband went to work while the wife stayed at home to devote herself to housekeeping and raising children.
Today, however, more households have broken away from the traditional model, with both spouses in employment. There have also been major social shifts regarding the handling of household chores.
A long road ahead
It would be wrong, however, to simply assume that the revision of the spousal tax deduction system alone would be sufficient in allowing more women to find employment. There are a myriad of reasons why many women who want to work are unable to do so. Many full-time housewives are so tied up with child-rearing and caring for elderly parents that they find it very difficult to join the labor force.
In addition to the spousal tax deduction, the government must also consider how to resolve the other obstacles obstructing women from working. Pressing issues include eliminating long waiting lists for day care centers, expanding the nursing care insurance system and rectifying the customary practice of working long hours.
Some estimates suggest that abolishing the exemption would result in a tax increase of about ¥70,000 for a household with an annual income of ¥5 million. The government will also need to consider relief measures to ensure the additional burden on household budgets after the system review does not increase significantly.
If the consumption tax rate is raised to 10 percent in October 2015 as scheduled, the burden on family budgets will balloon even further. The government is considering cutting the corporate tax rate, but the move could fuel criticism that businesses are receiving preferential treatment while households are being slapped with higher taxes.
In campaign booklets containing the Liberal Democratic Party’s policies for the House of Representatives election in 2012 and last summer’s House of Councillors election, the ruling party declared it would retain the spousal tax deduction system. Many LDP members are reluctant to review the system, or are outright opposed to such discussions. One of the most vocal opponents is Finance Minister Taro Aso, who said, “We mustn’t do anything thoughtless.”
How can more employment opportunities be created for women? We hope the government and ruling parties will deepen discussions on this issue from a wide range of viewpoints.
(From The Yomiuri Shimbun, April 24, 2014)