Japan plans tax break to encourage spouses to work more hours

Country's aging society threatens to stifle economic growth

TOKYO (Reuters) — Japan's ruling coalition approved a plan on Thursday to increase a tax credit for married couples to encourage spouses who work part-time to increase their hours, hoping to relieve chronic labour shortages in some sectors.

The plan, part of Prime Minister Shinzo Abe's labour reform drive, lets primary earners claim a tax deduction of 380,000 yen ($3,352) if their spouses earn up to 1.5 million yen a year, versus the current 1.03 million yen ceiling.

Abe hopes that a higher ceiling will encourage lower-earning spouses — many of whom housewives who keep working hours below the 1.03 million yen cap — to work more as labour shortages in Japan's fast-ageing society threaten to stifle economic growth.

The annual tax code revision is expected to be endorsed by the cabinet this month and submitted to parliament early next year.

Junko Sakuyama, an economist at Dai-ichi Life Research Institute, wrote in a report, "I doubt if this revision alone will expand employment of medium- to low-income part-timers."

The ruling coalition initially sought to abolish the spousal tax deduction and switch to a standard tax break for married couples regardless of their income.

But they dropped this idea out of concern it would upset households with a high income-earner and a homemaker.

The planned revision will not affect households with couples who both work full-time, but it basically benefits ones comprising a full-time employee and a part-time worker.

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