Rate Hike Needs Careful Planning

BCCJ ACUMEN January 2014

Careful planning will be required to ensure that, as future changes to consumption tax laws are clarified, businesses are prepared and able to efficiently meet their tax compliance obligations.

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Rate Hike Needs Careful Planning

• Plans to tackle “regressive” consumption tax
• More firms may outsource compliance
• Policy credibility at stake

Japan’s consumption tax, introduced in 1989 as a levy on the supply of goods and services, is similar to the European value-added tax (VAT). Initially 3%, the rate was increased to the current 5% in 1995.

Although politically sensitive due to the burden it places on consumers, the tax is an important source of revenue for the Japanese government. It accounts for 20% to 25% of the total tax raised, which is greater than the contribution from corporation tax. 

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