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Japan eyes tobacco tax hike to cover revenue shortfalls

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Here it comes, the tax system here, already a nightmare to navigate, is going to get even more screwed up.

Abe envisions dropping the "legal" age to drink and smoke to 18 as well, in an attempt to increase tax revenues too. The first step was giving the vote to 18 year old's, the next this one.

Cigarettes and tobacco products here are close to or lower than 1/3 to 1/2 the cost of a similar product in other developed nations. One pack of JT's flagship "Mevius" (aka Mild Seven) brand is 440円。

3 ( +3 / -0 )

And this is why Japan on this subject is so bass ackwards. The J-govt wants to raise taxes on tobacco to increase revenue, which explains why efforts to reduce smoking go absolutely nowhere. Yet continued smoking is a major cause of increased medical costs. Get a freaking clue.

6 ( +7 / -1 )

I support this much more than raising the consumption tax. They would not dare raise taxes on alcohol though, the Keidanren would have a foot up their a** so fast if they tried that.

Doesn't the Japanese govt have enough tax money at this point? They really need more?

1 ( +1 / -0 )

I have to think about quitting smoking not because of the hazards but because of the prices.

0 ( +2 / -2 )

200%, no 500% tax raise! They're not only killing themselves, they're killing people around them too, 30% of lung cancer caused by second hand smoking says latest research

1 ( +4 / -3 )

No problem with this but they really need to tell us what they are spending the current taxes on. Seems I am taxed and taxed but see no return or improvement in my area. Over reprentation under service seems to be the norm.

4 ( +4 / -0 )

Absolutely delusional!

Just this week they refused the measure to curb public smoking and protect public health.

Now they want to tax smoking, which causes a myriad of illnesses and obviously raises public health costs...?

The irony, folks

The question is, will the JT lobbyists even LET them raise taxes...?

1 ( +2 / -1 )

I want to know how many members of the diet smoke or not smoke?

0 ( +0 / -0 )

Japan could wipe out all its debt with a few simple measures:

1) Increase taxes on tobacco by 500% (this won't stop the addicts smoking, so no problem). 2) Imposing a 50,000yen fine on anyone speeding, or not having their child in a proper child seat. 3) Making prostitution legal, and imposing a tax on it. If these measures were properly enforced, Japan would be rolling in cash before a year is out.

-1 ( +2 / -3 )

Japan needs workers and buyers. These are two categories in short supply.

2 ( +2 / -0 )

When the country last raised the tax in 2010, state revenues increased by several hundred billion yen.

So raise it again and again before you raise the consumption tax! Sheesh!

0 ( +1 / -1 )

Giving everyone a tax break in the name of helping those on low-incomes is bad, bad tax policy.

And now the government finds itself needing to hike tax rates elsewhere...

Good tax policy would be to just tax everyone and everything with a simple flat rate, and use the revenues collected to target assistance to the poor as required to ensure they are supported adequately.

The government should know better, having just moved to eliminate distortions that were created by the beer tax.

An efficient taxation system allowing for undistorted, maximum economic growth, and a safety net to go with it paid for by the revenues - this is the best way to acheive the government's objectives.

Of course, the alternative to hiking consumption tax rates would to completely overhaul out-of-control government spending programs, but it seems everyone wants to keep their "free" stuff that is paid for by all of us. Or better yet, future taxpayers - anyone but we ourselves who receive these "free" services. Put another mortgage on the kids please, yes...

As for other alternative revenue sources, the government is also looking to increase taxes on incomes from financial transactions such as dividends on stocks and stock trading, the source said.

Taxing investment more at a time when government is complaining about a lack of investment is pretty dopey.

Japan's problems seem to only be getting worse...

2 ( +2 / -0 )

Doesn't the Japanese govt have enough tax money at this point? They really need more?

That depends on the people. Government spends 100 trillion yen a year, including about a quarter related to debt service. Government collects only around 65 trillion a year in revenues. The gap is made up by issuing more debt.

The government would have enough tax money, if people were willing for it to stop spending some 35 trillion yen of that 100 trillion yen each year.

The social welfare spending alone is about 35 trillion yen a year.

If the government reformed that program to one based on savings, rather than taxation, then it would go a long way to doing the trick.

But some people think that the government types are geniuses, and do not want to contemplate paying for stuff for themselves out of savings - they believe it is important to pay tax and receive service back from the government for "free" in return. Especially so, if someone else is paying more of the tax than oneself. This is "fair", apparently.

0 ( +1 / -1 )

It's not "free" if you have paid for it.? No matter how convoluted the money trail is. Tax smokers reduce government spending leave me something.

0 ( +1 / -1 )

they really need to tell us what they are spending the current taxes on.

You can read about that in the 2017 budget posted on the MOF homepage.

See page 6:

http://www.mof.go.jp/english/budget/budget/fy2017/01.pdf

A big part of expenditures (24%) is related to debt. Knocking that debt down is one key to being able to cancel tax hikes and even one day reduce taxes.

But even if the debt mountain were only a quarter of what it is, spending program reforms in other areas required too, to balance the budget.

I would love to take a scalple to wasteful spending, but people will have to be down with the idea that they need to pay for stuff by themselves if they want, rather than pay tax to government and get "free stuff" back in return. 

The way to do that in Japan, I believe, is through savings based funding schemes, rather than taxation based schemes that Japan has now. Japanese people like to save money. So tax Japanese people less, therefore letting Japanese people save more, and have them pay for stuff they want by themselves, out of those extra savings.

Suddenly the money is not in crooked Abe's hands, anymore. Couple this with a safety net for the needy. Problem solved, for good.

1 ( +2 / -1 )

It's not "free" if you have paid for it.? 

People don't pay for a lot of stuff that the government spends money on. Someone paying 1/10th of the full cost the government spends to provide something to the recipient is getting the other 9/10th's "free", is what I mean. 

But it's not free because that cost is coming out of our taxes. So by making it seem "cheap" or "free" these systems hide their true costs to those receiving services. I think significant wasteful spending occurs because of this.

1 ( +1 / -0 )

It makes much more sense to increase the tax on luxury goods such as tobacco and alcohol and decrease on essentials such as fruit, vegetables, meat and fish. Other countries also do this.

3 ( +4 / -1 )

The Japanese government "dealers" have never concerned themselves about the health of the nation if it means a loss of their drug profits from tobacco and alcohol. In WW2 they were the biggest drug pushers in the world pushing the made-in-Japan tobacco monopoly on to the subject peoples of their self-styled "Great Asia Co-Prosperity Sphere". An even less well-known fact about the ruthlessness of Japanese fascists is their tireless promotion of opium sales in China in a vain attempt to smash Chinese resistance by enslaving the population to opium addiction. This is one of the "forgotten" history lessons Japanese children never learn in school, but can read about if they can escape from the manacles of MEXT's mind control: 日中あへん戦争 ( The Sino-Japanese Opium War/ Iwanami )

5 ( +5 / -0 )

The gov't owns 1/3 of the stocks of Japan Tobacco, which has a monopoly, so it profits from cigarette sales both from stock dividends and from tobacco tax revenues. Yet lower smoking rates helps reduce medical costs for the entire society. Debates on this just go round and round in circles.

-1 ( +0 / -1 )

More money needed to waste. Toll has increased by about 40% since Abe became prime minister.

If anybody thinks their standard of living will improve under ldp rule should have their brains checked.

2 ( +2 / -0 )

It makes much more sense to increase the tax on luxury goods such as tobacco and alcohol 

Japan is just in the midst of unwinding the distortionary beer tax, I thought they had learnt that lesson.

Not sure tobacco is a luxury good, but hiking the tax will reduce the number of smokers. But the point of hiking the tobacco tax seems to be to gather extra revenues, not reduce the number of smokers.

and decrease on essentials such as fruit, vegetables, meat and fish. 

Essentials "such as"... Sounds nice and kind, but its a terrible idea. It just creates more and more vested interest groups. And if food were so essential, the Japanese government wouldn't place massive tariffs on imports. If you want to lower food prices, the call should be for abolishing tariffs, not creating exemptions in the consumption tax rates.

Is a watermelon an essential? Is a kiwifruit an essential? Is a mango an essential? Think about who is buying mangoes in the first place - it's the middle class to rich people. I never heard of a poor person paying 100 yen for a single kiwifruit.

Let's just not go there, and boost support for the poor through the social welfare safety net systems instead. That's why we have those systems in the first place.

Other countries also have simple, low rate broad based consumption taxes. Japan is in the right camp at the moment, but looking to join the dark side...

1 ( +2 / -1 )

Yeah, get ready for a whopping 10 yen increase when Japan Tobacco puts their foot down. We all know the government has no teeth when it comes to smoking laws.

1 ( +2 / -1 )

Is a watermelon an essential? Is a kiwifruit an essential? Is a mango an essential?

They're food, so Yes of course they are.

I never heard of a poor person paying 100 yen for a single kiwifruit.

It would be a start if the kiwi cost only 92 yen, as it would without the consumption tax. By all means tax eating out, alcohol, junk food, etc., but let the poor people be able to afford a nice bit of healthy fresh fruit now and again.

Other countries also have simple, low rate broad based consumption taxes

Some other countries have zero-rate or reduced-rate on foodstuffs. UK, Turkey, Switzerland, Spain, the Netherlands to name a few.

0 ( +1 / -1 )

Idiotism at best, if you wanna tax tobacco more, fine even though I am a smoker but use it for direct health benefits for populace instead of covering holes made by your corruption.

2 ( +2 / -0 )

This makes it very easy to understand why they refused to place more strict public smoking laws the other day. They are just making too much money from smokers to worry about those that don’t smoke.

0 ( +1 / -1 )

45% addicted so they will pay. Japanese govt can buy more weapons, change the constition...next will alcohol, the breathing.

2 ( +2 / -0 )

45% must have gone up a bit from the 2015 figure of 19.3%. Naah, don't think so. ;)

1 ( +1 / -0 )

By focusing on revenue, the government is acting just like a tobacco company.

They (government and tobacco companies) are basically working the supply and demand curves to maximize either tax revenue or revenue.

Lower the legal age to get more revenue generating smokers/taxpayers.

Charge enough to increase (tax) revenue , but don't charge so much that people quit buying.

1 ( +1 / -0 )

They would not dare raise taxes on alcohol though, the Keidanren would have a foot up their a** so fast if they tried that.

Do you have ANY idea what you are talking about? Taxes on alcohol were raised THIS year, nearly across the board. Guess the Keidanren "missed" with their feet!

2 ( +2 / -0 )

If you tax ciggies enough it might cause people to stop buying the filthy things and so could lead to less people smoking. Also explains why they won't ban ciggies in public places, etc... cunning.

1 ( +1 / -0 )

let the poor people be able to afford a nice bit of healthy fresh fruit now and again.

Eliminating consumption tax on kiwifruit and mangoes etc won't mean the poor can afford to buy any though.

They won't be able to afford to buy fruit unless they have sufficient income (some people have none), that's what the safety net should provide for. Hiking consumption tax just means they should get a little more support, say 3% more if the consumption tax rate is going up 2% to be sure.

Some other countries have zero-rate or reduced-rate on foodstuffs. UK, Turkey, Switzerland, Spain, the Netherlands to name a few.

I recall hearing all the horror stories about the "Pasty Tax" in the UK when they introduced just this problem. No need to go there, if the safety net systems are in place and set up appropriately, IMO. New Zealand and Singapore have flat rates too, I believe.

We should be generous people through our welfare systems, not through our taxation systems.

Alas, Japan is set to go down the wrong path. I predict bureaucratic horrors.

0 ( +1 / -1 )

@fxgai

I completely agree. There should be no exceptions to the consumption tax at the point of sale. The countries that go down that road end up caving in to special interests and creating perverse incentives I can't even imagine how bad it would be in Japan.

I remember reading about one country that decided not to tax any food intended to be eaten by children. Where it ended up was that if you bought a single donut it was taxable, but if you bought a pack of 6+ donuts it was tax free. The logic being that 6+ donuts would probably be eaten by a family where children might eat them. Needless to say, all of the donut packs containing 2-5 donuts disappeared off supermarket shelves over time.

I support sending out a ¥50,000 yen cheque to every low income person at the beginning of the year which would effectively refund all of the consumption tax on their first ¥500,000 spent, regardless of what they might be buying. (assuming the rate goes to 10%)

-1 ( +1 / -2 )

I support sending out a ¥50,000 yen cheque to every low income person at the beginning of the year which would effectively refund all of the consumption tax on their first ¥500,000 spent, regardless of what they might be buying. (assuming the rate goes to 10%)

It's a waste of tax money.

1 ( +1 / -0 )

@Yubaru

It's a waste of tax money.

How so? Currently, they want to exempt all sorts of things from consumption tax to lessen the burden on lower income people. ie. healthy food, medicine, childrens clothes, educational books, and so on. There are 2 ways to do this.

Method 1). Develop a byzantine system of varying tax rates that special interests will manipulate to gain a competitive advantage for their product, few people will understand, and will require hundreds of inspectors to investigate shops defrauding the government by claiming to sell zero-rated goods but pocketing the difference.

Method 2). Simply estimate how much the average low income person spends annually on the items you want to exempt from tax, multiply this amount by the tax rate, and refund it to them.

You will be getting one of these two systems in Japan soon. Which do you prefer?

0 ( +1 / -1 )

BTW, it's not my idea. It's a system that is already used around the world. US states, Canada, and parts of Europe.

For example, here is the Province of British Columbia in Canada. It seems you can get a sales tax refund of $75 if your income is below $15,000. (or slightly less if your income is over that amount)

https://www2.gov.bc.ca/gov/content/taxes/income-taxes/personal/credits/sales-tax

The refund is not a waste of tax money if the alternative is to exempt goods and never collect it at the point of sale.

0 ( +1 / -1 )

As someone who has experienced life on both sides - growing up not far from dirt-poor, gradually working my way up to reasonably affluent - I do not favour the 'safety net for the poor, give 'em a handout' approach. To me, it stinks of charity. In my personal experience, people on low incomes don't want to be labelled charity cases. They want to be at least given the chance to better their situation. You don't do that by taking most of their money off them in the form of indirect taxation on essentials, and them throwing them crumbs to underline their lowly, feckless position. I think there's a very real chance, too, that employers of low-income workers will feel justified in keeping wages unrealistically low, 'because hey, the govmint gives 'em money'.

When I was growing up poor I benefited through 'socialist' policies - free education, free healthcare, etc. - and now I see no reason not to pay my fair share of income tax so that those who are today in the situation I used to be in, have the chance to make things better for themselves.

0 ( +1 / -1 )

I don’t see how we can magically ensure that all are able to provide for themselves, without a safety net. Ideally we wouldn’t need one, but it’s just a fact of life that we do.

You don't do that by taking most of their money off them in the form of indirect taxation on essentials

Essentials is undefined, and however you do define it, we end up giving tax breaks to the rich as a result.

People do want a chance but fidgeting with consumption tax does nothing to secure one for them.

A better approach would be to cancel the bottom income tax bracket. Here in Japan 97,500 yen is paid on income up to 1,950,000 yen. So cancel that, ensuring low income earners get more tax home pay. Adjust the higher brackets slightly to keep it revenue neutral, shifting the income tax burden to those with means. It’s crazy to tax people on 1.95 million yen if income.

This way the consumption tax burden is alleviated from the lowest income earners, and we don’t give rich people a tax break on their 500,000 yen fruit purchases.

When I was growing up poor I benefited through 'socialist' policies - free education, free healthcare, etc.

Me too.

now I see no reason not to pay my fair share of income tax so that those who are today in the situation I used to be in, have the chance

Agree. This is the safety net I am talking of.

But I don’t myself need government to give me stuff for ‘free’ in exchange for paying lots of tax. Many people are in the same situation, I believe most. In my personal case, money is not an issue - but access to service is. This suggests that with reforms, I could receive adequate service, and someone could earn good money for providing me with them efficiently. This could mean economic growth for Japan, even.

Lets keep taxes for the safety nets, and just let us keep our own money rather than having bureaucrats decide how we need it spent on ourselves, with them receiving a slice for their troubles. This is my conclusion.

I have been doing my homework on reforms to transition to such systems. The best I have seen so far is a proposed reform discussed in a paper called “welfare: savings not taxation”. It draws heavily on features of Singapore’s health system, but includes differences.

It also lays out the stark unsustainable future of existing pay-as-you-go welfare systems. I think it is just a matter of time before reforms similar to those proposed in the paper are enacted around the world, hopefully before crises strike, rather than afterwards.

Even in Japan there are already small steps, but it’s all so slow and timid. Let’s do it. Let’s just get straight to where we know we are headed. NISA accounts and iDeCo accounts for example have some good features. Japan should expand these systems and make them more fundamental to how services/ welfare is funded, than taxation.

-1 ( +0 / -1 )

I don’t see how we can magically ensure that all are able to provide for themselves, without a safety net.

There's a difference between a safety net and charity.

we end up giving tax breaks to the rich as a result.

Counter that by upping the higher income tax rates. That way you make sure to take from those that have, without taking proportionally more from those who don't have.

A better approach would be to cancel the bottom income tax bracket.

It doesn't have to be either/or. They could cancel the bottom tax bracket, up the higher tax brackets and zero-rate food, clothing and medical care.

It’s crazy to tax people on 1.95 million yen if income

I agree. But a flat-rate consumption tax does tax them, and at a higher rate than it taxes the wealthy.

Here in Japan 97,500 yen is paid on income up to 1,950,000 yen

That's 1,950,000 of taxable income, of course. Add in 380,000 spouse allowance, another 380,000 for each dependent child, and another 380,000 basic allowance, and the figure at the top of the pay slip is in excess of 3,000,000 yen. Look at it another way, the bottom income tax bracket - the tax levied on income up to the sum of the relevant allowances, varying according to individual circumstances, is already 0%. I'm not saying that income tax rates cannot or should not be tweaked - far from it. If 5% on taxable income of 1,950,000 is considered to be too much, then by all means let us lower it, or raise the allowances higher. But don't then snatch all that money back, and then some, every time the person steps into a supermarket.

This is the safety net I am talking of.

Things like access to free education for all are not a 'safety net'.

I don’t myself need government to give me stuff for ‘free’ in exchange for paying lots of tax. 

But it isn't about what you need. It's about what's best for the population as a whole.

0 ( +1 / -1 )

Things like access to free education for all are not a 'safety net'.

What is the hang up with stuff being ‘free’ for all?

It’s not free, at all in the first place. We all know there is no Santa Claus.

Making sure that all have access to adequate is the goal, not that stuff be ostensibly ‘free’, when it is not.

But it isn't about what you need. It's about what's best for the population as a whole.

Thats what reformed systems would be. Systems that give opportunities to all, not systems that put power in the hands of bureaucrats that can never succeed to the extent that we the individual citizens of society collectively can.

If the bureaucratic centred system were working adequately, people such as me would not have realized how much better off we could all be with reforms.

Glad you think things are prefect though, thanks for caring!

0 ( +0 / -0 )

a flat-rate consumption tax does tax them

Not for working, it wouldn’t, if their income tax were cut.

What it comes down to is seemingly this - I care most about what works best; you care more about what ostensibly looks the way you want it to look.

0 ( +0 / -0 )

What is the hang up with stuff being ‘free’ for all?

It’s not free, at all in the first place. We all know there is no Santa Claus.

Yes yes, we all know Someone Has To Pay. That's how taxes work. Free at the point of use. You know what the idea is, you said you yourself benefitted from it. But now you don't want others to have the chances/breaks you were allowed.

Not for working, it wouldn’t, if their income tax were cut.

But as you've pointed out yourself, those on the lowest incomes don't pay income tax in the first place. You cannot cut their income tax, only resort to handouts.

And handouts lead to lower wages, as employers realise they don't need to pay a decent wage; the government will pick up the slack. Why should the taxpayer subsidise unscrupulous employees and big business?

https://www.cnbc.com/2016/05/12/one-in-three-us-manufacturing-workers-are-on-welfare-study.html

How you reckon that kind of system is 'what works best', beats me.

I care most about what works best; you care more about what ostensibly looks the way you want it to look.

No. You appear to care about what works best for you: low income tax rates for the affluent, regardless of how that affects the country as a whole. What I want is for everyone to have fair do's. In a system that works, without mollycoddling or demeaning anyone.

0 ( +0 / -0 )

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