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Registers, rates and points: Tax hike woes for Japanese retailers

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By Karyn Nishimura

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Over complicating things is a trait of Japan.

29 ( +29 / -0 )

10% is a lot simpler to calculate than 8% if you're focussed on simplicity.

IMHO, it's a good move, Japan has a fiscal problem, and can't pretend it can balance the books forever. The only thing else that will make it fairer is to tax foreigners/tourists as well, or make them pay some tax.

-9 ( +5 / -14 )

The government has raised consumption tax just as much as it has reduced corporate tax. A nice way to balance the budget.

10 ( +12 / -2 )

In three of my neighborhood convenience stores they removed the cafe/seating areas to eliminate any confusion for the customers or employees.

At one of them, the owner, an acquaintance of mine, said that it cost him around 1.5 million yen for the removal and remodeling, all of which, he had to pay for out of pocket. He is not a happy man, as since he had put the seating area into his convenience store he saw a jump in overall sales.

8 ( +8 / -0 )

I’m fine with the 10% tax. Ether than 8% for calculating it I’m not making any moves to cashless. No thanks. I’d like to continue to have my privacy.

-2 ( +6 / -8 )

A consumption tax hike? Great way to stimulate the economy!

/sarcasm

13 ( +15 / -2 )

Chip StarToday 06:54 am JST

Over complicating things is a trait of Japan.

Over-complicated and without clear explanation. An observer might think the government want to make things as opaque and abstruse as possible.

MeiyouwentiToday 07:37 am JST

The government has raised consumption tax just as much as it has reduced corporate tax.

The LDP represent Keidanren, not the people.

12 ( +13 / -1 )

 He is not a happy man, as since he had put the seating area into his convenience store he saw a jump in overall sales.

Then why not voice this grievance? Why continue to suffer silently? Isn't that the whole point of a healthy democracy?

2 ( +4 / -2 )

My local alcohol shop closed yesterday, they couldn't justify the expense of new registers, and are pretty old anyway, so they said 'stuff it, let's just close down'.

7 ( +7 / -0 )

That is interesting that some convenient stores have eating areas. Not in one that I have ever seen. But it is obviously impossible to patrol where customers eat unless the onsite ones are given plates instead of take out bags.

0 ( +0 / -0 )

@Sh1mon M4sada

Are you saying tourists should be taxed on duty and tax free items? Only to be taxed again when they get back home? Wouldn’t that force countries to also do the same as Japan which will ultimately either raise prices and costs or reduce tourism due to cost?

Raising the consumption tax will stagnate the economy. Many companies will also see this as an opportunity to subtly raise prices as well. So many will pay more than 2%. Also, when income has not moved or has shrunken over the past few years, an increase in taxes/decrease in disposable income means people spend less

7 ( +7 / -0 )

Then why not voice this grievance? Why continue to suffer silently? Isn't that the whole point of a healthy democracy?

To whom? When you have a government that rules in the manner like here, it's going to take a hell of a lot more than just some complaints from a small time convenience store operator.

I understand where you are coming from, but things here dont work that way.

5 ( +5 / -0 )

Cashless is much harder to hide from the taxman.

Cash transactions are easy to hide and 10% tax is trivial to calculate in your head for the customer. Just pay 10% on the receipts. It is a common problem world-wide.

Other countries have used the rebate system so some effect. It basically becomes a national tracking system for all purchases and screws anyone who doesn't have that tracking ID. It can be used to prevent non-residents from certain purchases. At least that was my experience in these other countries.

1 ( +2 / -1 )

That is interesting that some convenient stores have eating areas. Not in one that I have ever seen. But it is obviously impossible to patrol where customers eat unless the onsite ones are given plates instead of take out bags.

Not "interesting" really, been around for at least a decade or more. Even a few smaller local supermarkets have had these areas for years and years.

Here is a HUGE problem. Nearly every major department store, and smaller one's as well, have food court areas.

What the hell are they going to do? The seating areas are owned and operated by the department store, yet the shops, restaurants, snack places, etc are contracted businesses. The responsibility for the sales tax is on the contractor, yet the seating is controlled by the department store.

Some places, according to the news, are going to "eat" the costs themselves and continue to charge 8% and stop having to ask their customers whether it's for here or take away/out.

7 ( +7 / -0 )

One side comment, related to the "food courts" etc comment;

I really feel sorry for the teenager at the cash register that has to ask this question, "Is it for here or to go?" then have someone say they are taking it away, then go and sit down at a table and start eating. Are these kids going to be forced to ask the customer for the additional 2%? I can just see some anal owner forcing it on them!

6 ( +6 / -0 )

We're not going to monitor where they eat," she added, speaking on condition of anonymity. As a result, she has decided to simply apply the old eight percent tax rate to all her products and report all her sales as take-away.

Very sensible. That's exactly what I would do.

Over complicating things is a trait of Japan.

Absolutely!

Over-complicated and without clear explanation. An observer might think the government want to make things as opaque and abstruse as possible.

100% on the money.

2 ( +4 / -2 )

Seems like this is something that hasn't really been thought through.

5 ( +6 / -1 )

This weekend it was so crowded with shoppers everywhere, people stocking up on goods before the taxhike. The economy will take a big plunge after October.

5 ( +6 / -1 )

While they are at it they should force all prices to be listed as tax inclusive.

Also with this tax increase is the 1 yen still necessary?

-1 ( +1 / -2 )

@Sh1monM4sada 

Japan has a fiscal problem,

If Japan had a such a problem, govt bond rates and inflation would be sky-high, and the yen would be close to worthless, a la Greece or Argentina.

That Japan has negative rates, moderate inflation and the world's most popular safe-haven currency is solid, real-world evidence that Japan's fiscal state (as well as as its current account) are quite healthy indeed.

-2 ( +3 / -5 )

Why continue to suffer silently? Isn't that the whole point of a healthy democracy?

Whomever said that Japan was a "healthy democracy?" One has to go far out on a limb to even suggest it as well!

One really has to understand how the Diet and political system here runs to get an idea of why crap like this happens. Along with the fact that people are not yet fed up with having to pay more, they are apathetic for the most part, and do not see "their" representative as being responsible, that along with not having any viable opposition to vote for.

The opposition here, for the most part, are former LDP, and it's hard to differentiate between them and the LDP. The rest are all fringe parties with no national recognition.

Even if the people got well and truly "mad", it would only be the downfall of the current PM and some cut-out cookie of a replacement would be waiting in the wings to take over.

In truth; the populace isn't mad enough, nor suffering enough either to force a change!

5 ( +5 / -0 )

Copying the American way might be good. Not tax on any unprepared food as in supermarkets, but tax on any prepared food. Simple & works fine.

-1 ( +2 / -3 )

I really feel sorry for the teenager at the cash register that has to ask this question, "Is it for here or to go?" then have someone say they are taking it away, then go and sit down at a table and start eating.

Most fast food restuaruants already ask this question so they can put the stuff in a bag for you. If the person says "to go" but then sits down, the cashier has done nothing wrong, and it is the customer who is doing the tax evasion. But nobody will care, especially that teenager earning 900yen an hour.

In three of my neighborhood convenience stores they removed the cafe/seating areas to eliminate any confusion for the customers or employees.

Removing 1.5m worth of seating, and a potential business generator, just because you cant ask the question of whether it is to go or not? Somebody is making far too much of a fuss over this.

I'm not happy with the dual tax rates, i think it should just all be 10% for calculation simplicity, but i dont get what the big fuss is about asking customers if its to go or not. So many fast food places will already ask you, and as a consumer you can just think of it as a convenience fee for using their seating areas.

3 ( +3 / -0 )

My local alcohol shop closed yesterday, they couldn't justify the expense of new registers, and are pretty old anyway, so they said 'stuff it, let's just close down'.

Why do they need new registers? They already calculate at 8% no? Who “dines in” at an alcohol shop?? Or are you talking about a bar?

But this is interesting because snacks bought at the movie theater being taxed 8% because you’re taking this next to “your seat“. Why wouldn’t this apply to restaurants and bars where you have your own seat as well? Or is that because you paid money for your seat in theater? If that’s the case, then anywhere with the table charge should be taxed at 8% as well!

1 ( +1 / -0 )

Since uncle Sam become costly this tax hike is good start to keep things moving safely....

-2 ( +0 / -2 )

it is the customer who is doing the tax evasion. 

Customer with “to go” order sits down in restaurant feeling smug about saving 2%.

Men in suits show up. “Sir, we need to have a talk.”

2 ( +2 / -0 )

Also with this tax increase is the 1 yen still necessary?

Yeah, because not everything is going to be 10%.

Removing 1.5m worth of seating, and a potential business generator, just because you cant ask the question of whether it is to go or not? Somebody is making far too much of a fuss over this.

If you know anything about Japanese society and culture you would not be asking this question. I get why he removed it, and all the others that have or are doing so as well.

It may not make sense to people who are not accustomed to living here, but it makes total sense to both him, me, and his employees as well.

1 ( +1 / -0 )

That Japan has negative rates, moderate inflation and the world's most popular safe-haven currency is solid, real-world evidence that Japan's fiscal state (as well as as its current account) are quite healthy indeed.

This is the simplistic view of things, one that I'm sure various Argentines said at one time, too. Japan is on firmer ground globally because almost all of its debt is serviced by the savings of Japanese people. Countries run into deep trouble when they finance big debts with outside money. In the short-term, yes, Japan continues to function as if healthy.

Long-term? Domestic savings are shrinking. The population is aging. As old people increase and use up their savings, what happens to Japan's debt? Fewer workers will be paying into the tax system. Less private money will be saved, so the pool of money to finance the debt will be smaller. At the same time, there will be more people than ever living off of pension system. Japan will be spending more, bringing in less, with less savings to finance it all. The long-term future isn't healthy.

A best-case scenario for Japan may be continuing a long, slow fade with a near zero-growth economy for decades to come. Worse scenarios could see Japan relying increasingly on international markets to finance debt, which only lasts as long as the illusion of safety is maintained. One conflict with China, or even with North Korea, or some other shock to the system, and the house of cards could crumble.

2 ( +3 / -1 )

There are lots of good reasons to phase out the 1 yen coin, but the shift to 10% tax has no bearing on this whatsoever. Do people think that with 10% tax, their bills are now magically going to end in a zero??

0 ( +1 / -1 )

Less private money will be saved, so the pool of money to finance the debt will be smaller.

Most of the debt, Japan's JBG's (gov bonds), are held by the BOJ, GPIF and other public sector entities. The tax hike isn't needed "to raise revenue" because when Japan's debt matures, most of the proceeds go back to the Ministry of Finance. Ergot: Japan borrows its own money from itself and pays itself back. That's why all the debt doomsaying over the past 15 years has never come close to matching reality.

This is the simplistic view of things, 

The simplistic view is to view a country's public finance as working the same way has household finance. Households have to pay back their debts. Countries like Japan dont. That's because households dont have money printing machines, nor can they issue bonds, including to themselves.

 slow fade with a near zero-growth economy for decades to come. 

Japan's GDP per capita growth is usually positive and in line with OECD averages. GDP by itself is merely aggregate output and is irrelevant as a measure of the economic health of a country with a shrinking population.

-4 ( +0 / -4 )

In three of my neighborhood convenience stores they removed the cafe/seating areas to eliminate any confusion for the customers or employees.

If this is the case, they will potentially lose money from me. If I'm sitting there eating, I'm more likely to buy a drink or other stuff later on. If I'm gone, I'm gone.

This whole eat here vs to go thing is ridiculous. If you have the money to buy meals at a conbini or restaurant, you can afford the extra 2%. They should instead use the reduced tax rate for necessities like diapers and tampons, etc.

3 ( +4 / -1 )

Copying the American way might be good. Not tax on any unprepared food as in supermarkets, but tax on any prepared food. Simple & works fine.

The American way? The American way would be having no national consumption tax. Each prefecture would be completely free to set its own sales tax, and 100% of that money would stay at the prefectural level. Some prefectures would opt to tax certain items at different rates, while others might set a consistent rate for everything. One prefecture, for example, might tax all food items at the same rate. A neighboring prefecture might set a different rate for groceries. Yet another prefecture might collect no tax for groceries at all. Yet another prefecture might collect no sales tax whatsoever, instead relying on higher property or income taxes to balance the books.

Can you imagine if Tokyo and Chiba set different consumption tax rates? The flow of people from one to the other for shopping would be massive. With the exceptions of Hokkaido and Okinawa, Japan's prefectures are mostly small and closely situated, and it would be certain that prefectures would start to compete to attract shoppers and residents with various tax schemes. That competition could be beneficial in some respects, but it wouldn't address the massive hole in the nation's finances.

And the regulations in certain American states defining clearly what counts as a "grocery" item vs. prepared food, junk food, etc., are hardly simple. Supermarkets can't function without computer systems to track and calculate proper tax rates. People have to be hired full-time just to keep the massive product database updated and in compliance with the tax law. Supermarkets operating in more than one state have to maintain separate systems for each state. Lower or no taxes on groceries are intended as a benefit to poor consumers, but the different rates create an expensive burden for businesses to comply. Supermarkets recoup costs by adding more self-checkout lanes and hiring fewer workers, and then the poor who were supposed to benefit are frequently out of work entirely.

That's the American way.

3 ( +3 / -0 )

I’ve been home sick the last few days so haven’t seen what’s happening, but I sure hope the local convenience stores, supermarkets, and even some drug stores that have little eat in areas complete with microwaves and hot water pots do not remove them. They are a great help especially to older customers who aren’t driving and are very grateful for a place to have a bit of rest in an air conditioned or heated place before moving on to the next errand. There is actually a lot of outdoor public seating in this city but sometimes it involves an extra hike and in any case is useless when it’s raining. And in winter it’s all covered in mounds of ice and snow. Removing those eat in spaces would be a real disservice to the community especially the elderly and disabled.

1 ( +1 / -0 )

I like the 1 yen coin. You can amaze kids by making it float on water ,(surface tension!) and it can be used as a screwdriver in a pinch.

5 ( +5 / -0 )

I suppose the problem here is that a place that charges everyone the takeout price is going to be cheaper than somewhere who charges everyone the eat in price.

Laws, tax codes included, need to be drafted so as to not incentivize non-compliance. This law encourages widespread non-compliance at a level that will cost much more to investigate and enforce that enforced compliance will gain. The complexity of the law sounds like it is creating more bad feeling than the actual cost to people's wallets.

3 ( +3 / -0 )

Raising the consumption tax will stagnate the economy. 

It's not an economic stimulus policy, that's for sure.

But what if we ask "why" a few times here? Consumption tax is a thing because the government spends 30-35 trillion yen more than it brings in in tax revenues each year.

That was the original reason why consumption tax was to be hiked - to start paying for a little more of what the government is already outlaying, without going further into debt.

But in the end, the government decided to actually spend more money and do so with the extra 3-5 trillion yen of revenues from the 2% consumption tax increase.

So at the end of it all, the government is still spending 30-35 trillion yen more than it brings in in tax revenues.

Some might say that Japan's companies, or the rich should be taxed more. But I would say that, while they might be taxed more, just like a 2% increase in consumption tax, it is still going to be nowhere near enough to plug the 30-35 trillion yen deficit, which recurs again and again on an annual basis, which is the reason Japan has accumulated 1.1 quaddrillion yen of public debt.

To make matters worse, the government also introduced this ridiculous dual-rate consumption tax system, which has complicated things unnecessarily in many other countries already, before Japan. Rather than stick with a simple single rate like other smarter countries, Japan decided to be stupid too, and they made it more complicated than I feared they would.

Let's just hope the game of musical chairs keeps rolling along and we are all done over by climate change before this debt mess explodes!

1 ( +1 / -0 )

My question here is why is food (not Junk Food, sweets, candies etc.) taxed anyway?

Why is medicine taxed?

Why are diapers taxed?

Why is my water, electric and gas bill taxed?

Why are school uniforms and books taxed?

This government really has no clue. If you want to increase the population with the indigenous people and not import workers, stop the ridiculous taxing of human existence necessities. Tax everything else at 15%. Start taking care of your poor, your humble, your people.

5 ( +5 / -0 )

A key source of revenue to fund government plans including free child care.

BS! We heard the same malarkey when they introduced the first sales tax hike. If I remember correctly, the first sales tax hike was to be used to pay off the public debt, but the Abe government has borrowed more money from the BOJ three times.

it would be great if the money was used for what they say it will be used for, but history shows a very different reality.

5 ( +5 / -0 )

As an academic question, what if a diner eats on a patio arranged by a food supplier? Is that in or out? This reminds me of that California guy who evaded the twin laws of no public drinking and no indoor smoking by quaffing a beer and having a cig, one in each hand, while straddeling the doorway.

2 ( +2 / -0 )

@ Bugle Boy of Company B

It is an alcohol store, so they need to go from 8% to 10% for the alcohol drink. If they register is an "old" ones it can not make automatic calculation for any other tax than 8% so they need a new one. Possible also that they are selling snack to go with the drink which will be 8% (for the non alcoholic beverage, I think it also stay 8%). So this mean they need one which will do the 2 tax rates. So it will be more expensive.

It look like it is an old store owned by old people which perhaps doesn't even have that many customer so that is not worth the cost neither the trouble of doing it "manually".

@ Yubaru

It is too late for the one which already spend a lot of money but if you have other acquaintance with the same trouble, you should suggest them to work out around the chair : remove the chair and make the table an exhibition area, if they want no eating in or give chair only to customer saying they want to eat in. Less costly and since it is quite possible than the exemption for take out will dry out in the future...

1 ( +1 / -0 )

That has raised concerns about fraud after the disastrous rollout of convenience chain 7-Eleven's cashless payments system, which was shut down days after starting because of a hack.

No. It wasn't because of a hack. The system was not hacked. It was designed without spending half an hour thinking about account security. And no, the problem is not with the missing two factor authentication. The problem was with sending a password reset link to an email address of choice (!) when the former mailadress, the birthdate and the telephone number are known - three pieces of information that are required fields for every form (online and offline) this country has ever seen...

So - please stop giving people the impression that the system was "hacked" by some kind of evil genius. It was just designed by a five-year-old.

2 ( +2 / -0 )

@sh1mon.You must not be very educated about foreign people in Japan. I have to pay tax every month, and pay into the pension system as well even though I only work one day a week.

2 ( +2 / -0 )

Tom

My question here is why is food (not Junk Food, sweets, candies etc.) taxed anyway?

You indicated the answer within your own question there :)

Let's recall, the purpose of a tax collection system, is to collect tax revenues!

And it's good economics to collect taxes in such a way as to minimize the distortionary effects of the tax system on economic activity. Broad-based taxes, as opposed to narrow-based ones, can consequently be lower in rate, than would otherwise be the case, in order to collect the same amount of tax revenues.

Japan's introduction of multiple rates here illustrates the economic damage done due to the distortionary nature of the dual-rate system changing various economic behaviour. Businesses have been wasting heaps of resources trying to deal with this stupid change, rather than focus on providing more value for their customers.

Why is medicine / diapers / water, electric and gas bill taxed?

It's the same as for food - no exceptions is simpler for the tax collection system. Everything is taxed to have a broad-based system that can have lower rates and minimize distortionary impacts on the economy due to the tax collection.

Now of course, I know what you're thinking! We shouldn't be taxing stuff that you or I personally deem "good" or "necessary"!

However, recall that the purpose of the tax system, is to collect tax revenues.

What must not be forgotten is that on the other side of the government's budget ledger is the spending of those tax revenues! This government spending is where we collectively have the chance to ensure that the needy are given assistance they need in order to buy adequate food, medicine, housing, etc etc.

But doesn't it seem inefficient to tax us on things and therefore deny us the ability to afford to purchase them ourselves? Well no - not for most people. That would only apply to people on the margin, and there is going to be a margin, somewhere. 

At the end of the day, a person with zero income, cannot buy any food, medicine of housing. It doesn't matter whether there is tax or not, because they have no income to buy anything, irrespective.

They therefore depend on government assistance, the funding of which is one of the reasons that we have a tax collection system.

So we need a safety net anyway, and if in collecting tax revenues to fund this safety net we bring the margin a little higher, that's basically a trade-off that policy makers have to make. The alternatives are to have more complicated bureaucracy and overall worse situation for the collective people of the economy.

0 ( +0 / -0 )

An interesting example I saw was that an Italian restaurant I frequent does pizza takeaways. 

Pizza in Japan should be considered a luxury in my books, but buying a pizza and taking it out will net a tax break for the rich indulging in great Italian pizza. Until now I've only eaten in, but might look to do the take away thing sometime.

-1 ( +0 / -1 )

Pizza in Japan should be considered a luxury in my books, 

How dare you! (lol!) If pizza is a luxury, then so is whale meat, wagyu, 20,000 yen mangoes, 1.5 million yen melons, and the rest!

Pizza is food from the gods and should NEVER be taxed!

Man can not live by water alone! He must have pizza! (It's health food too!)

3 ( +3 / -0 )

However, recall that the purpose of the tax system, is to collect tax revenues.

Tax systems have multiple purposes. One is to collect revenues. The other is to modify behavior, such as by discouraging consumption through "sin taxes" (cigarettes, gasoline) or promoting consumption through "virtue tax refunds" (electric cars, exemptions for marrieds, etc.).

1 ( +1 / -0 )

Quite true Nessie. However, inadvertently modifying economic behavior through complicated tax rates is something typically desired to be avoided, I suppose.

I really can’t understand the logic of this difference between eating in and taking out, but already it has impacted economic behavior.

0 ( +0 / -0 )

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