Japan Parliament passes 10% Consumption Tax
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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