You must know about “consumption tax” and in this feature, we talk about the increase in consumption tax in Japan.
What is consumption tax?
The consumption tax also referred to as shohizei (消費税), is basically the same as the Value Added Tax (VAP) applied in many other countries. The consumption tax in Japan applies to commercial, food and service products.
Japan’s current consumption tax rate is 8%, and there are several stores in Japan that offer tax free shopping for foreign travelers.
To know more about the tax exemption process: New duty-free shopping rule in Japan!
History of Japanese Consumption Tax
Consumption tax was first applied in Japan in April 1989, and the tax rate at that time was 4%. Since then the level of consumption tax has increased over the years.
In 1989, the consumption tax rate was 4%, and then it rose to 5% in 1997. Tax consumption again rose to 8% in 2014, and next, this rate will increase to 10% as on October 1, 2019.
Debates around the increase
The increase in consumption tax is bad news for residents in Japan. With the increase in consumption tax rates from 8% to 10%, this has a considerable influence on the daily lives of residents and is also a source of major problems in the administration of financial documents.
Although Japan’s consumption tax rate will rise, the Japanese government will also implement a tax reduction system for certain items. This tax reduction system will allow consumers to buy these products only by paying an 8% tax rate for items limited to:
1) Some types of food items, drinks, and daily necessities
2) Tax deductions only apply to ‘Take Away’ when ordering food in a restaurant
Here are some examples of what happens:
– Onigiri, hamburgers and other fast foods: 10% when eaten in the restaurant, and 8% when taken home.
– Food products purchased at mini markets, bento shops and supermarkets: 10% when eaten in the store, and 8% when taken home.
– Food at street vendors that have no seats: 8%
– At food courts: 10%
Starting in October this year, you have 2 choices: eat in and pay a 10% consumption tax, or take out and pay a consumption tax of 8%.
Slightly confusing, isn’t it?
Don’t forget to check our feature on duty free shopping, use the Ikidane Nippon app to get exclusive discounts in stores!