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Japan considers reduced Consumption Tax rates ahead of 2015 hike to 10%

  • Nov 7, 2014 | Richard Asquith

Japan considers reduced Consumption Tax rates ahead of 2015 hike to 10%

Ahead of the planned October 2015 rise in Japanese Consumption Tax to 10%, the Tax Commission has started consultations to introduce a reduced rate on certain products. The industry and consumer groups involved so far have already given a majority agreements to the initiative. Final proposals will be produced before year end.

The proposals looked at nil ratings on basic and perishable foods, and impact of excluding alcohol, confectionary and restaurant-provided food.

Changes to Japanese invoice rules for reduced rates

If reduced rates are implemented, then the invoice disclosure requirements will also have to be extended. Presently, taxable persons are not required to show the gross amount only, without details of the Japanese Consumption Tax calculation. If reduced rates are introduced, then invoices will have to breakout the tax rates and calculations.

Doubts about second Japanese tax increase

The Oct 2015 rise follows the first-part rise from 5% to 8% in April 2014. The rises were proposed in 2011 to help meet the spiraling social welfare of a rapidly ageing population. At the time of the first rise, there was an expected bringing forward of consumer spending into the first quarter of the year, with a resulting heavy drop off in the following month. However, the economy has continued to stutter since then. This has put some doubts around the second rise that may still be delayed if GDP growth continues to suffer.

VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.