Japan Parliament passes 10% Consumption Tax

Wed 15th Aug 2012

The Japanese Parliament has backed Prime Minister Noda by ratifying the proposed increase in Japanese Consumption Tax (VAT)  from 5% to 10%.  Read about the original two-stage proposal here.  However, a political concession tied to the Bill mean there is a good chance that the rise will never be implemented.

The arguments over the rise in the Consumption Tax are based around a rapidly ageing population and overwhelming sovereign deficit.  In addition, at 5%, Japan’s consumption tax in one of the lowest in the developed world.  For example, most European Union states have an average 20% VAT rate.  In the rest of Asia Pacific, rates vary – Singapore has 7% GST; China VAT is evolving at around 17%.

As a concession to powerful minority parties, the government agreed to a clause which will prevent the rise being implemented if growth does not stabilise at 2% or above.  Japan has not achieved this level of expansion in over twenty years since the big credit bubble.



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