The ruling coalition decided Dec. 14 to impose higher or new taxes on high-income employees, smokers and travelers in a plan that will add 280 billion yen (about $2.5 billion) in revenue a year.

The amount will rise to 340 billion yen if the Diet passes a revision bill to include another new tax.

Tax breaks will be offered to children who inherit companies, freelancers and employers that provide higher pay to their workers, according to the tax-reform plan of the Liberal Democratic Party and junior coalition partner Komeito.

An income tax hike is scheduled to start in January 2020 and is expected to increase the government’s revenue by 90 billion yen a year.

People subject to the income tax increase will be: about 2.3 million company employees and public servants whose annual income exceeds 8.5 million yen; about 200,000 people with an annual income, excluding pensions, topping 10 million yen; and about 3,000 people whose annual income from pension payments is more than 10 million yen.

Employees and public servants of households involved in child-rearing or nursing care will be exempt from the income tax increase.

The income tax will decrease for freelancers and others who do work for companies but are not officially on their payrolls.

The government is also expected to introduce a departure tax in January 2019 to collect 1,000 yen from people, including Japanese, when they depart from or leave Japan.

Revenue from this levy will be used to promote tourism.

In addition, a forest environment tax will begin in fiscal 2024. It will add 1,000 yen a year to residential taxes, which are paid to local governments. The revenue from the forest environment tax will be used for measures to protect forests.

The tobacco tax will be raised for the first time in eight years. From October 2018 to October 2021, the tax on one cigarette will be rise by 3 yen incrementally.

The inheritance tax rate will be reduced for people who inherit companies from their parents. The lower rate will be in effect for 10 years from January 2018, and it is designed to encourage more children to take over their parents’ small or middle-sized companies.

For three years from fiscal 2018, companies that raise wages or invest in plant and equipment significantly can receive corporate tax reductions.

The LDP has accelerated talks on tax reform since winning the Lower House election in October. The next national election is scheduled for summer 2019.

Although many companies are reporting strong business performances, wages have not increased as expected by the Abe administration.

Some critics have raised concerns that the tax hikes will have a negative impact on consumption, which is already sluggish.

(This article was written by Junichiro Nagasaki and Keiko Nannichi.)