Japan proposes 8% reduced Consumption Tax rate 2017

Wed 23rd Dec 2015

Japan is to hold Consumption Tax at 8% on foodstuffs, non-alcoholic drinks, books and other essentials when it raises the rate on all other goods and services to 10% in April 2017. The new rate will apply to fresh and processed food.

The measure will cost an estimated Yen1 trillion per annum.

The measure is designed to soften the impact of the VAT-like tax which has been planned since 2012. The rise to 10% was originally scheduled for October 2015, but was delayed following the impact of the last Consumption Tax rise to 8% in 2014. The two rises are intended to help fund the spiraling social care costs for a fast ageing country.

A reduced rate on essentials is intended to aid the poorest in society. However, it also grants a tax subsidy to all consumers. A tax-break for the less well off may be better achieved through changes in the welfare system. Reduced rates also add to the complexity of the VAT regime.