Looming October tax increase confuses

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The Japanese consumption tax hike from 8% to 10% from this October is not as straightforward as it sounds. For the first time, there is a reduced tax rate as the rate for food and beverages, excluding alcoholic drinks, will stay at 8%.

Mirin(left) and mirin-style seasoning(right)

Mirin (みりん), a condiment essential for Japanese cooking will be taxed at 10% because it is classified as an alcoholic beverage. On the other hand, Mirin-style seasoning(みりん風味)with low alcohol content has a tax rate of 8%. Also, non-alcoholic beer remains at 8% because it contains less than 1% alcohol.

Many merchants complain that the new tax system is confusing and hard to manage. NTA publishes application examples on its website, however, it’s complicated with line drawings of products, and it is very unlikely that consumers and disruptions on sales floors can be avoided.

In the case of in-store dining, for example in convenience stores with café corners and fast-food restaurants, a 10% tax rate will be applied but take-outs are taxed at 8% for the same foods. At least one Japanese fast-food chain, Sukiya, has decided to keep their beef bowl price the same ¥350 including the tax whether the customer eats in the store or takes the food out.

All Nippon Airways Co., Ltd. announced Oct. 4 that it will up its domestic fares because of the consumption tax hike from October. A 10% consumption tax rate is applied when travelers make reservations and purchases after Oct. 1st. However, reservations and purchases made before October, the tax rate of 8% will apply even if the travel date is after October 1st.

Tax hikes are never popular and that applies to the consumption tax, too. Less than 30% of young people agree with the consumption tax increase, according to a survey by the Nippon Foundation. They conducted a questionnaire on the Internet for men and women between the ages of 17 and 19 and received a total of 1,000 responses. The Japan Foundation, based on the analysis of the survey showing low support for the consumption tax hike, says it’s necessary to continue to explain to the younger people why the tax increase is necessary and unavoidable.

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