Plan to tax overseas digital content shelved

Kyodo

The ruling Liberal Democratic Party plans to shelve a plan to revise tax codes in fiscal 2013 to begin imposing the sales tax on digital content, including e-books and music downloads from overseas vendors, from the next fiscal year, sources said.

Government officials and lawmakers have been unable to work out the necessary details because of the leadership change following the Dec. 16 general election, which saw the LDP oust the Democratic Party of Japan from office, the sources explained Tuesday.

The plan would have imposed the tax on digital products downloaded over the Internet, and the levy would have been hiked in line with the planned consumption tax raise to 8 percent in April 2014 from the current 5 percent.

The tax code at present only allows taxes to be levied on products traded domestically, digital or otherwise, and on imported physical goods. Domestic vendors of digital content argue that not taxing digital content from overseas sources such as Amazon.com is placing them at a competitive disadvantage.

The Finance Ministry was thus considering introducing a requirement for overseas vendors to register with Japan’s taxation authority and declare income from their online operations. Under the previous plan, revisions to the tax code would have been considered in fiscal 2014 or later, the sources said.