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Japan to double consumption tax to 10%, G20 action plan says

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On top of overly priced goods, they want us to pay more. This could only work in japan without hurting the econony. Japanesr people are not price sensitive, rather trend wise. Shoganai!

0 ( +4 / -3 )

The only issue I have is how govts especially the japanese one uses our money. I hate it when they bail out companies who over pay execs and their employees. The rich get richer. It has been and will always be. So the only choice for people is to be on the winning team and tjat is the rich team.

3 ( +5 / -2 )

I support raising it, but 10% over " a few years " is too extreme. Increase it 1% a year at most ( I's rather see the end rate be about 8% ) Hopefully the 10% proposal is a negotiating tactic. Hopefully.

6 ( +7 / -2 )

On top of overly priced goods, they want us to pay more....Shoganai!

So glad I don't have to justify that sort of "logic" anymore. Especially since "shoganai" is not the only answer.

-4 ( +0 / -4 )

10%! That's too much!!! Especially without seeing some serious measures in the government to curb in rampant spending and graft. It's much too easy to simply raise the tax burden on everybody instead. Unfair. If I could vote, I would vote NO WAY.

5 ( +5 / -0 )

This corrupted government and their smegma politicians have reached a new low. How am I not surprised?!

This country is nothing but an utter disgrace...and it will keep sinking!!

4 ( +7 / -3 )

It will gradually be increased... and the end game.. it will be increased. How about this... We made a plan for the consumption tax to be increased... plotted out that it will take 5-6 years to raise enough revenue then gradually decreased back to the original 5%...

The end result of this will be a increase in revenue but a decrease in domestic consumption.. People are holding on tight already in households with kids. The future looks a little bleaker sometimes when you know that your going to be paying more tax but you already dont have a lot of money in the first place.

BUT... thank god im employed, thank god i don't live in china, and thank god there are no mosque's near my house.

-1 ( +1 / -2 )

Paddy, am I reading you right? It has always been my understanding that VAT was a tax imposed on the value added at each stage of production/marketing etc, while consumption tax is a tax imposed on the final retail price? I know when the 3% shohizei was first introduced prices stayed the same and the 3% was added to the total at the bottom of the receipt (They changed that when slapping the tax on everything was deemed 'easier to understand').

Genuinely Confused in Tochigi

1 ( +1 / -0 )

So glad I don't have to justify that sort of "logic" anymore.

Yes, we know, herefornow. You are very fond of telling us how you are no longer "Here for now" and how pitiful we all are for being here.

0 ( +1 / -1 )

pawatan -- not "pitiful", just, willing to let your future, especially your financial future, be determined by a government that has shown time and time again that it is almost completely inept, and failed for over 20 years to solve these kinds of issues before they became such huge problems, and, throwing your lot in with a people that don't do a darn thing about it, other than shrug and say "shoganai" and take a perverse pleasure in knowing they live in the most expensive country in the world. Simple choice of priorites. As much as I dislike the Tea Party, Japan could use a dose of that kind of activism. But it will never happen. So prices will just go up at least another 5%, on top of the other tax increases.

-3 ( +1 / -4 )

Raising the consumption tax to 10% was a foregone conclusion prior to 3/11, now it's inevitable. However the government needs to seriously reconsider how the tax is implemented to avoid making the less well off here even poorer.

Tax luxury items, tobacco, alcohol, high end food item's like wagyu etc and eliminate the sales tax on food products that families in particular need to raise their children. Milk, bread, cheese, rice, the staples. The people who want to pay more will always pay more, but for families an additional 5% on top of what they currently pay will hurt them and through a ripple effect the entire nation more than they truly understand.

10 ( +10 / -0 )

@Yubaru

Raising the consumption tax to 10% was a foregone conclusion prior to 3/11, now it's inevitable. However the government needs to seriously reconsider how the tax is implemented to avoid making the less well off here even poorer.

Tax luxury items, tobacco, alcohol, high end food item's like wagyu etc and eliminate the sales tax on food products that families in particular need to raise their children. Milk, bread, cheese, rice, the staples. The people who want to pay more will always pay more, but for families an additional 5% on top of what they currently pay will hurt them and through a ripple effect the entire nation more than they truly understand.

Excellent post as usual. (^_~)

3 ( +4 / -1 )

Raising the consumption tax will be a divisive issue for Noda’s government which is grappling with social security and tax reform, as well as a strong yen.

Translation: Expect the current prime minister, to pass along the baton of incompetence to the next prime minister, within nine months from now.

0 ( +2 / -2 )

The 100% increase (5% - 10%) in consumption tax hasn't been decided domestically yet. How can he make an international commitment?

4 ( +4 / -0 )

So they increase it. What do we get out of it? More spending on education, hospitals, pension? Nope? How about the cut useless spending like construction to nowhere and raise taxes on luxury goods like brand name goods, tobacco and alcohol? Oh right, because the fat cats don't want to. Idiots.

If I wasn't married to a local, I would be out of here. The future of this country is bleak at best.

1 ( +4 / -3 )

One thing I find ironic is that they're trying to boost tourism to an already overpriced country and now it's going to become yet more expensive. Splendid.

8 ( +8 / -0 )

While " gradually" is the key word, smart average Japanese wage earners would likely squeeze spending at home, only spending overseas to take the advantage of the strong yen & to avoid the consumption tax rise whenever possible ?

2 ( +2 / -0 )

@tmarie

So they increase it. What do we get out of it? More spending on education, hospitals, pension? Nope? How about the cut useless spending like construction to nowhere and raise taxes on luxury goods like brand name goods, tobacco and alcohol? Oh right, because the fat cats don't want to. Idiots.

If I wasn't married to a local, I would be out of here. The future of this country is bleak at best.

Exactly, tmarie. Now they expect us to just submit to their will and just be quite about it, but spend spend spend. It's a very coward move to raise our taxes but what about the tobacco? Why couldn't they increase it? Aww, because of the old useless bureaucrats in this corrupted government. "Don't touch my tabako"... Ha!!

0 ( +3 / -3 )

All readers, please do not be impolite to one another.

0 ( +0 / -0 )

No surprise there. I have been waiting for that. Of course there will be nothing temporary about it.

1 ( +1 / -0 )

. It's a very coward move to raise our taxes but what about the tobacco? Why couldn't they increase it?

Because everytime they did so, the tobacco tax revenue decreased. Would that translate to increased consumption tax=decreased consumption tax revenue? The answer is "probably not".

0 ( +0 / -0 )

Amazed that Japan is actually seeking help and listening to advice given by other countries.I wonder if Greece and Italy have given any advice? Borrow as much as you can from the UK and Germany and then ask for plundered art back or gold plundered in WW2 as a debt swap mechanism!!! Seriously though Japan seems to think 10PC consumer tax is OK as other developed countries have much higher rates of VAT.They fail to mention that high rates of VAT are only on luxury items.Food,clothing,books,newspapers and other essentials have a zero rating.If consumer tax is increased to 10PC you can be assured it will not go back down in the future. Once the Tohoku reconstruction is taken care of there all the problems of an ageing society and a massive public debt.

3 ( +3 / -0 )

It's a very coward move to raise our taxes but what about the tobacco? Why couldn't they increase it?

They just doubled the taxes on tobacco last year, BlueWitch. Tobacco tax increases rapidly get into diminishing returns, which is great for improving people's health and well being but not so great for increasing revenue. Taxes on other luxury items tend to decrease consumption as well.

1 ( +1 / -0 )

We eventually will pay 10% and our lives will not improve one iota.

2 ( +2 / -0 )

The money can be used to build more airports in Japan.

-1 ( +0 / -1 )

Simple: I will buy less stuff. 10% is not too bad if the yen wasn't too damn high! A high yen is excellent for saving, which is what I'm doing and a higher consumption will encourage more people to save money pushing the yen's price even further up

1 ( +1 / -0 )

Once the Tohoku reconstruction is taken care of there all the problems of an ageing society and a massive public debt.

Keep in mind the Japan's situation and those in Greece are two totally different situations. The Japanese public holds an overwhelming amount of the debt, it is not in foreign hands, which while a burden a the economy is not as dangerous to the world economy as Greece's debt is.

Yes Japan has a crap load of problems, but it still has the world's 3rd largest economy.

4 ( +4 / -0 )

I have a solution for you guys.

Why don't you ask govt bureaucrats to take 10% pay cut for the next 5 years? Why don't you cut all politicians into half including municipal politicians? Japan has too many politicians who love to sleep in diet sessions. Their real business is normally done at Geisha party.

Tax hike only works when spending cut is implemented. That simple.

Tell them you are willing to sacrifice and pay 10% sales tax if they are willing to do two things listed above. I would like to know their reaction to this proposal. Do not say Shooganai anymore, folks..

3 ( +3 / -0 )

As if politicians are exempt from sales tax???

0 ( +0 / -0 )

@ globalwatcher they need to cut the number of political divisions in Japan. Some of them are almost if they were created just to fill up job positions.

0 ( +0 / -0 )

アメリ フセイン, Greece austerity ultimatum given by Euro is 30,000 bureaucrats job cut. Japan can think about this option.

1 ( +1 / -0 )

Remeber, G20 leaders and the world have been very concerned about Japan's sovereign debt of 200% (debt/GDP ratio) that is not healthy at all.

The drastic change is needed to restore Japanese economy, so that Japan can get out from the "lost decade". BOJ has been running out of bullets to stimulate economy. How many years have you been sitting with almost 0% interest? Nothing has happened.

Japan's sovereign debt has been a dead weight working against Japan itself IMHO..

0 ( +0 / -0 )

so, they're talking about raising it TO 10% . not raising it 10% . looking at, i'm assuming, a 1% hike for 5 years. but rest assure , after that's done they'll find some other reasons to keep raising it . 1 major problem here is the pension system. although it's mandatory to pay into it, i believe about 40% of the japanese don't pay anything . start collecting that & i'm sure it would help tremendously .

0 ( +0 / -0 )

The only thing that would help tremendously would be for the public to realize that hoarding all the trillions of yen that they do for a rainy day is not going to do them any good in the future.

Oh that and cutting out all the dead weight in government as well.

1 ( +1 / -0 )

Lots of good posts here; I strongly agree with the idea that food and other essentials should not be taxed.

Another important point (which I've tried to make in previous discussions) is that having the same high consumption tax nationwide is going to ruin the smaller local economies who are less able to absorb a further 5% of all their spending being sucked down the government sinkhole. Here's an idea: let each prefecture decide on an appropriate tax level!

Tokyoites could probably endure paying the government an extra 10% on everything they buy, but out in the countryside where jobs are scarce and government budgets are smaller?

0 ( +1 / -1 )

Raising the consumption tax will be a divisive issue for Noda's government which is grappling with social security and tax reform, as well as a strong yen.

It's not a strong yen, it's a weak dollar and euro.... and besides, if they're going to raise the consumption tax, then by God, reduce the prices of everything purchased from other countries! It just doesn't make sense that we should pay more for things purchased from overseas amid a so called "strong yen".

0 ( +1 / -1 )

The consumption tax is NOT 5% now -- it's 5% at each stage of transaction, from manufacturer to wholesaler, from wholesaler to retailer and from retailer to end-user. So it's already 15% raise it to 10% and it effectively becomes 30%. If the idiots who run this country don't drop the consumption tax on foodstuffs, medications and rents, I expect to see starving seniors lining up to buy tickets at Shin-Koiwa station in order to fling themselves in front of the Narita Express.

1 ( +3 / -2 )

Increasing the consumption tax will reduce consumption. Low consumption has been Japan's primary economic problem for two decades. Increasing the consumption tax is exactly the wrong move.

1 ( +1 / -0 )

So they increase it. What do we get out of it? More spending on education, hospitals, pension? Nope?

How about the national DEBT? Isn't paying off the debt the real reason for this doubling of consumption tax, not to mention most other taxes?

The only way that money comes into existence is through debt (ie, a bank loan). When that money is created out of thin air along with added interest it creates a ponzi scheme. Why?

Because (1) The interest was never created at the time of the loan so how can that which never existed be paid back? (2) The money is leveraged; in other words the banks loan many multiples of what they actually have in their vaults (or on their computer terminals). Every time you stick Y1000 in the bank it can be leveraged up to 10 times or more so that the bank can now loan out Y9000 which it never had.

In Japan's case the government has borrowed trillions upon trillions of yen from the privately owned Bank of Japan and other bond holders. So these loans, which were created through sleight of hand, need to be paid back along with added interest. That's where the taxpayer comes in and IMO is the main reason for the consumption tax hike.

3 ( +3 / -0 )

Japan has many good things the govt provided; social harmony, clean & safe food/drinks, good transportation, low unemployment, decent education, etc. 200% govt debts are not sustainable. 10% comsumption tax increase is needed.

Nevertheless costs can be saved by:

Cutting subsidies to agriculture interests Cut distribution channels & costs Cut red tapes & bureaucarcy for building businesses & attracting foreign investments & tourists

Japan politicians & CEOs are decently paid unlike grossly overpaid Wall Street & other developed nations executives.

BOJ has allowed Yen to be too strong for too long. Resulting in top Japanese manufacturers losing even to Koreans & Taiwanese. BOJ bureaucrats must stop idling. No need to ask other nations when come to FX interventions. Look at US QEs, China & South Korea regular FX interventions. Look at Swiss National Bank. Do the necessary. If not Japan may completely hollow out.

0 ( +1 / -1 )

Virtuoso and Patrick, I don't think your explanation of the tax rate is correct. Japan's consumption tax is a "pass through" tax. Although it is added at each stage of the process, tax submitted to government is the remainder of tax received on goods sold minus tax paid on materials, etc. So the net payer is the end consumer, and it really is 5%.

3 ( +3 / -0 )

"A nation trying to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle."

Winston Churchill

4 ( +4 / -0 )

@albaleo

You are absolutely correct.

source: http://www.zeikin-taisaku.net/2007/08/post_84.html

0 ( +0 / -0 )

It has been 5% for more than 10 years in Japan so is it really a surprise they want to increase it? Especially in light of the March disaster. Australia went from zero consumption tax to 10% in one go about 10 years ago. Canada's and Europe's are higher still. Unfortunate or not, it has to be done.

-1 ( +0 / -1 )

"A nation trying to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle." Winston Churchill

I find it most amusing how foreign leftists in Japan denounce their adopted government raising taxes but want to see them raised in every other successful capitalist democracy, America in particular.

1 ( +3 / -2 )

This sucks!

1 ( +1 / -0 )

Guys, seriously - stop complaining. There is a legal EU minimum of 15% sales tax. In the UK it is 20%. 10% is nothing, unless you're an American that doesn't understand the concept of a national sales tax at all.

And for the poor, it's possible to protect them by having a reduced or zero rate on essential things like food.

3 ( +3 / -0 )

Patrick, I'm sure it's not that simple, but Virtuoso was describing the 10%- 15% - 20%, etc. levels as a general characteristic of the tax. That isn't the case. In general, only 5% is paid, and ultimately by the consumer.

0 ( +0 / -0 )

"Keep in mind the Japan's situation and those in Greece are two totally different situations. The Japanese public holds an overwhelming amount of the debt, it is not in foreign hands, which while a burden a the economy is not as dangerous to the world economy as Greece's debt is.

Yes Japan has a crap load of problems, but it still has the world's 3rd largest economy."

This is often cited by quite a few posts that the Japanese debts is 'internal business', hence, none of foreigners' business ! Take a more in-depth understanding.. The debts remain still debts especially when these have reached a more than alarming 200% of the world's 3rd largest economy or the size of US' GDP in ~ one year (?). These are debts held by Japanese nationals ( individuals or institutions ).. When one could get the money back fell in the black hole ? A vivid example is : you owe your brother ( internal) some big money as compared to a friend ( external )..you feel more 'comfortable' cause you have a good brother who keeps saying ' he ain't heavy, he's my brother' then fine, hope all Japanese holders of govt treasury bonds are 'good brothers' who are rich enough & lend out money for brotherhood !

0 ( +0 / -0 )

The YEN is at AT ALL TIME HIGH against the USD and now a 10% tax?? IDIOTS!! Japan is in DEFLATION and now this?? IDIOTS!!

0 ( +1 / -1 )

This is often cited by quite a few posts that the Japanese debts is 'internal business', hence, none of foreigners' business

Ahh but you are assuming something and reading something into this that I never wrote, which is your mistake. I only pointed out that there is a distinct difference between the two. While Greece needs foreign intervention to survive, Japan does not AT THIS TIME. The debt is very real, and it is a problem that needs to be dealt with and possibly with international assistance as well, BUT Japan is not, (currently) in a position where it is defaulting on any of it's international obligations (debt).

0 ( +0 / -0 )

Before the privately owned US Fed was established in 1913 there was NO income tax. Since that date many other taxes have been introduced on top of the income tax and that includes consumption tax. In many countries people are drowning in taxes because of the fractional reserve banking system and the "necessity" to pay off the national debt.

The politicians say we need to double the consumption tax. But replace the predatory central banks with, say, honest governments (naive?) which issue interest-free loans, or a genuine free market and we would not be here discussing why, whether or how much the consumption tax should be raised. It would not be necessary.

The only trouble is that doing away with privately owned central banks is a bit difficult to carry out - ask JFK or Lincoln. But these are different times and I'm hopeful.

0 ( +0 / -0 )

now a 10% tax?? IDIOTS!! Japan is in DEFLATION and now this?? IDIOTS!!

A higher sales tax would help counter deflation, at least in the short term. That would be good for Japan.

1 ( +1 / -0 )

This is not a new idea and 10% will be the norm from here on out. Paying for an area's reconstruction? I never agreed or voted for such a thing - oh that's right I can't. The lemmings should call a referendum on whether rebuilding those few towns in Tohoku justifies this raise. I'm for encasing Fukushima and Miyagi ken in concrete, and Iwate ken's reconstruction cannot be worth a 5% hike.

-1 ( +0 / -1 )

I believe the funds from reconstruction are not coming from consumption tax but temporary increase in personal income tax, local tax, corporate tax and tobacco tax. The remainder will be derived from sale of government holdings such as JT stocks and the rest is funded by a re-construction bond.

-2 ( +0 / -2 )

"temporary tax" is a myth, nigelboy. Once the tax is established, the gov't will never let that cash source disappear.

2 ( +2 / -0 )

Agree Ranger. What's disgusting is the fact that Noda promised the consumption tax increase to the G20 before getting a consesus from the Japanese public. An important decision like this requires snap election.

0 ( +0 / -0 )

Nowadays Japanese 71 and over hold 70% of $11 trillion or $7.7 trillion in household financial assets. This is very significant as the next younger generation will soon inherit this wealth. But Japan has an inheritance tax that ranges from 10% to 50% and the J-government will realize a very big tax windfall in the coming years. Also since a great amount of this wealth is in JGB's, this combined with the additional 5% sales tax rate, may be the key to significantly reducing the nation's debt!

But this could all be a very short-lived scenario. Now more than ever, so many domestic and international firms are reducing their Japan presence or just leaving altogether. Also with with the shockingly low birth rate showing no end in sight, without some major policy changes, there simply will not be enough future tax revenue for sustainability. The 3-11 trifecta of disasters could not have come at a worse time. RIP Japan.

0 ( +1 / -1 )

Nowadays Japanese 71 and over hold 70% of $11 trillion or $7.7 trillion in household financial assets. This is very significant as the next younger generation will soon inherit this wealth. But Japan has an inheritance tax that ranges from 10% to 50% and the J-government will realize a very big tax windfall in the coming years. Also since a great amount of this wealth is in JGB's, this combined with the additional 5% sales tax rate, may be the key to significantly reducing the nation's debt!

Hence the phrase that there are few if any 3rd generation rich in Japan.

0 ( +0 / -0 )

Japan has an inheritance tax that ranges from 10% to 50%

Japan has an inheritance tax that ranges from 0 to 50% (less substantial deductibles) depending on the size of the inheritance and the number of people legally entitled to share it. No one, but no one, ever pays a straight 50% inheritance tax.

0 ( +0 / -0 )

No one, but no one, ever pays a straight 50% inheritance tax.

Oh yeah? Tell that to my neighbor.

0 ( +0 / -0 )

Indeed the money is being used for the debt BUT why are they not clamping down more on needless spending? People want something back when taxes are raised. I want the promise of a pension since I am paying into it. I would also like education reforms, rather than airports in the middle of nowhere and roads that god up the sides of mountains no one goes to. I would like all the BS of bottled water, government enkais and all that crap stopped. I would like TEPCO to be bought out by the government so those fat cats don't get their bonuses for ruining the country!

With regards to tobacco revenue going down... In the long run, I am sure the country would be saving more in hospital costs with treatment for smoking illnesses. Long term gain over the short term.

Up the tax on luxury goods. There is no reason why the "rich" can't afford 15% tax on an ugly bag rather than tax the poor 10% on food. It is unjust and morally wrong to just raise tax without thought to those it will truly harm.

0 ( +1 / -1 )

Keep in mind the Japan's situation and those in Greece are two totally different situations.

Yes and No. The idea is to intentionally destroy all major economies. That's why we continually see the politicians making stupid decisions (but only from the public's point of view) or 'saving the day' at the last minute only to have the same problem pop up a few months later. Eventually the "solution" will be to introduce a one world currency (the IMF has one on tap) and a one world authority, which will really be a dictatorship in disguise.

It's not only in Europe. Remember the theatrics a few months ago in the US to raise the debt ceiling? It wasn't a solution, all they did was delay the inevitable. This is all by design.

So if people think that the politicians, especially those at the top, truly worry about the average family and even Tohoku then I think they're mistaken. This tax has little or nothing to do with that. It's further proof that a transfer of wealth is underway to the men who own both the mega-banks and government.

Even a child knows you can't solve this by monetising and paying off never-ending mountains of debt with even more debt, or by overburdening the public with ever-increasing taxes etc. And so do the politicians.

If people think a one world currency is out of the question look at what we already have: World Trade Org, World Health Org, International Criminal Court, IMF, World Bank, the UN and so on. Behind the scenes they're run by the same crowd.

The good news is that most of the elites' memes are failing and people are catching on.

0 ( +0 / -0 )

It depends what you compare it to. Some months ago they were playing with a figure of 12%. Compared to that, then 10% seems like a bargain.

In Europe the figure is around 20%, which makes10% here seem cheap, but each time the Europeans increased it the hope behind the increase was betrayed by the reality, and more and more people find ways of not paying.

Did the introduction of a 3% Shohizei solve Japan's problems? No. Did an increase from 3% to 5% solve Japan's problems? No. Will an increase from 5% to 10% solve Japan's problems? Obviously not, but politicians love to change something, anything, while they are in office.

If they keep this system, perhaps they should make people pay gradually more by each age group, say 5% up to 39, 7.5% 40 to 49, 10% 50 to 59 and 12.5% over 60 or something.

But in reality Japan should decrease the Shohizei to 3%, or better still, scrap it altogether.

1 ( +1 / -0 )

I say, raise taxes on the evil cigarettes to such heights that no one smokes those horrible cancers sticks.ndefensible way to raise money for the gov't. Make all smokers pay for their own end-of-life cancers, not us, the health insurance payers. Oh, and invest all possible money into keeping jobs in Japan, renewal resources to reduce then eliminate all the nuclear power plants, and seriously chose methods that are proven to work by so many other countries so the population learns real English. This is my beautiful day dream

If a 10% sales tax was paying for all of that, I would not mind. Since it is not, I DO mind!

2 ( +2 / -0 )

I also hope this is just a negotiating tactic, and I would rather see it decided to raise the consumption tax 2-3% from fiscal 2013, for example, than changing it one per cent per year 'over a period of years', which would cause (even more) chaos.

I also agree that it being raised is inevitable, but hope it isn't a broad tax over EVERYTHING, but is levied on alcohol, tobacco, and luxury items, not food and other necessities.

-1 ( +0 / -1 )

I also agree that it being raised is inevitable, but hope it isn't a broad tax over EVERYTHING, but is levied on alcohol, tobacco, and luxury items, not food and other necessities.

I agree, yet I realize as well that the tax folks here would have too hard of a time trying to determine what an essential is.

1 ( +1 / -0 )

If the current government makes to see this submitted to the Diet, they will be catapulted out into the stratosphere.

-1 ( +0 / -1 )

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