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Japan Consumption Tax hike helps sink economy

  • Feb 18, 2020 | Richard Asquith

Japan’s increase in its Consumption Tax rate from 8% to 10% on 1 October 2019 is set to tip the country into recession.

Quarter 4 growth for 2019 has been reported as negative 6.3%. This compared to expected targets of negative 3.7%. With the effects of the coronavirus outbreak showing signs of hitting Quarter 1 2020 economic performance. This would mean a likely technical recession - defined as two successive quarters of negative growth - for the country.

When Japan raised its Consumption Tax rate from 5% to 8% in 2014, the country fell into recession as shoppers brought forward expenditure. The scheduled rise to 10% had to be postponed twice until 2019 for fears of triggering another recession.

The Japanese government had launched a range of support measures in 2019 to prevent a recession this time around, included shopping vouchers for the poorest. But this now seems to have had little effect.

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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.
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