Japan Consumption Tax doubling to 10% 2015 to be given fiscal stimulus

Wed 2nd Oct 2013

Japan has confirmed yesterday that it intends to double Japanese Consumption Tax from 5% to 10% in two stages: to 8% 1 April 2014; and then to 10% on 1 January 2015.  This is based on the latest growth figures for 2013, which were the best of the G7 countries.

Consumption Tax rise may fragile risk recovery

Whilst the Consumption Tax rise is aimed at helping to cope with the costs of the aging population – which requires heavy social spending – and the world’s largest debt stocks at €7 trillion.  However, there have been fears that such a rise would derail the recently established economic recovery.

To help ensure he gains political backing for the sales tax rise, Prime Minister Shinzo Abe yesterday announced a further round of fiscal stimulus to help ensure the revival continues.  The Consumption Tax rise will dampen the economy by up to 1% of GDP.  The package of measure announced on 30 September include tax breaks for individuals and businesses, as well as heavy infra-structure investment in the run-up to the 2020 Olympics in Tokyo.

China VAT is currently 17% and part of a major VAT reform.  The average EU VAT rate is over 21%.