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Japan slowing growth threatens Consumption Tax rises

  • VAT
  • 12 August 2013 | Richard Asquith

Japan slowing growth threatens Consumption Tax rises

Disappointing Quarter 2 GDP growth figures today put into question the prospect of doubling Japanese Consumption Tax by 2015.

The plan to raise Japan's Vat / Consumption Tax from 5% to 10% (8% in April 2014; 10% in 2015%) was first proposed in 2012. The risks and concerns about the impact on growth led to the then government falling.

The current Japanese government, under premier Abe, has brought in a range of lose monetary policies to finally raise Japan out of its 10+ years malaise. The consumption tax rise is seen as a key part of the economic reforms, crucial to help funding the rising social security bill from an ageing population.

The government had crucially set Q2 growth numbers as a test for the introduction of the tax rise. Today's numbers at 0.6% equates to an annualised rate of 2.6%. This compares to a market expectation of 3.6%, and 4.1% for the first quarter of 2013.

A final decision on the rise is expected this month.


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 this year won International Tax Review's Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.