Japan raises Consumption Tax to 10% 1st Oct 2019

Japan as increased its Consumption Tax rate from 8% to 10% today, 1^st October 2019. This is made up for two elements: 7.8% consumption tax; and 2.2% local consumption tax.

It has also introduced a new reduced rate of 8% for sales of some food and beverages, except for alcoholic drinks, restaurants or cafes. 6.3% consumption tax and 1.7% local consumption tax. Also, on newspapers published more than twice a week (under subscription contracts). 

The rise is the twice-delayed second step in doubling Japan's indirect tax rate. The first stage, going from 5% to 8% was in 2014. The hike to 10% has already been postponed twice in recent years. The first rise helped push Japan into a recession which led to continuing delays on the rise to 10%. 

The two Consumption Tax hikes to 10% are largely to help fund ballooning social security costs as the population ages. Japan also has the largest debt to GDP ratio amongst the developed economies.

The average VAT rate in the developed countries' club, OECD, is 19.3%.

Tax back on credit card payments

To boost non-cash payments, shopers will receive a 5% price rebate if they use credit cards instead of cash in smaller stores - exceeding the 2% tax rise. The scheme, known as the Point Blank scheme, will remain in place until July 2020.