This project aims to design and implement integrated reforms of Japan’s personal income tax, individual inhabitant tax, and social insurance contributions, using digital technology to improve neutrality, equity, and responsiveness to changing economic and social conditions.
Drawing on experience in the United Kingdom and the Netherlands, the proposed reforms would replace income deductions with tax credits, introduce current-year taxation for the individual inhabitant tax, and convert social insurance contributions into taxes. Harmonized tax bases and the offsetting of tax credits exceeding income tax liability against social insurance contributions would produce effects similar to refundable tax credits, easing burdens on low-income workers and strengthening work incentives.
Reforming withholding arrangements and fully utilizing digital technology and My Number cards would enable authorities to obtain income information in real time.
The project will review empirical evidence on reforms, including Universal Credit and Dutch income tax reforms, to inform Japanese policy debate through evidence-based policymaking. It will also estimate the proposed reforms’ economic effects.
Japan’s existing systems remain rooted in Showa-era conditions. By addressing technological change and inequality, this project seeks to formulate “Shoup Recommendations for the Reiwa Era.”