Japan Braces for Spike in Estate Tax

Seniors in Japan are bracing themselves for the increase in the estate tax on January 1.  The bump stems from a view among Japanese that pronounced wealth inequality is a bad thing.  “The feeling is it’s not good for society to have all these people born with silver spoons in their mouths.”

To shield their estates, some retirees are purchasing life insurance.  Others buy 18-karat gold Buddhist icons that can be passed on tax-free because of exemptions for religious items.  For some, the secret is in property.  “You pay a lot less tax if you move your cash into real estate.”

Inheritance taxes in Japan are so onerous that they even have their own proverb, translating to something like, “a fortune build in one generation will be taken by the government in the next three.” 

Currently, the National Tax Agency takes a piece of any estate worth more than $460,000, or 50 million yen.  Starting next year, Japan will lower the exemption to $280,000.  This means six percent of inheritances will be taxed, compared with about four percent now.  And Japan did not stop at inheritance taxes.  To help pay off the public debt, Japan ratcheted up the sales tax this year to eight percent from five percent.  It is scheduled to reach ten percent next year. 

See Jason Clenfield, Kathleen Chu and Katsuyo Kuwako, Land Loophole Looks Ever Juicier as Japan Bumps Inheritance Tax, Bloomberg Businessweek, Oct. 29, 2014.