OUR THOUGHTS ON:

Japan Increases Consumption Tax Rate

International

By Ken Kobayashi

Japanese Prime Minister Shinzo Abe has decided to enforce the scheduled consumption tax increase to 8% from 5 %, effective on April, 2014. The tax, which would be levied on goods and services, is considered to be easy to collect, and to causes less distortion to the overall economy. The Japanese Ministry of Finance states that increasing consumption tax is necessary because the cost of caring for the Japanese elderly population has been increasing, and it would prevent an increase to the nation's public debt. In addition, the consumption tax is considered to be an appropriate method since it applies to nearly everyone as a consumer. Moreover, tax revenue from individual income taxes and corporate income taxes decreases substantially in bad economic times; however, the consumption tax revenue has been 10 trillion in the past 10 years and is considered to be stable revenue and a resource of social security for the aging society. According to the "Tax Hike Bill" related to social security reforms, which was approved on August 2012, the consumption tax rate will increase to 10% from 8% on October, 2015.

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