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Japan Parliament passes 10% Consumption Tax

  • Aug 14, 2012 | Richard Asquith

Japan Parliament passes 10% Consumption Tax

The Japanese Parliament has backed Prime Minister Noda by ratifying the proposed increase in Japanese Consumption Tax (VAT)  from 5% to 10%.  Read about the original two-stage proposal here.  However, a political concession tied to the Bill mean there is a good chance that the rise will never be implemented.

The arguments over the rise in the Consumption Tax are based around a rapidly ageing population and overwhelming sovereign deficit.  In addition, at 5%, Japan's consumption tax in one of the lowest in the developed world.  For example, most European Union states have an average 20% VAT rate.  In the rest of Asia Pacific, rates vary - Singapore has 7% GST; China VAT is evolving at around 17%.

As a concession to powerful minority parties, the government agreed to a clause which will prevent the rise being implemented if growth does not stabilise at 2% or above.  Japan has not achieved this level of expansion in over twenty years since the big credit bubble.

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.