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Japan debate on reduced Consumption Tax rate

  • Sep 5, 2015 | Richard Asquith

Japan debate on reduced Consumption Tax rate

In the lead-up to the second raise in Japanese Consumption Tax (CT), from 8% to 10% in April 2017, debate is raging as to the value of introducing a reduced CT on essentials.

The proposal is for a reduced, 2%-5% rate, designed to help the low-income householders in the country, and offset some of the regressive features of CT. Alternatively, the government many introduce direct cash refunds to taxpayers based on a formula of forecast household spend on basic foodstuffs.

Japan raised Consumption Tax to 8% in April 2014. This was part of the two-stage plan, the second rise to 10% was scheduled for October 2015. However, the initial rise pushed up inflation and choked off a nascent retail sector recovery. Japan slipped bank into recession after the rise.

The doubling of Japanese Consumption Tax was drawn up to pay for the rapidly expanding social welfare costs of Japan’s ageing population.

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 can be contacted at: 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.