Overseas online purchases to be taxed in bid to protect domestic industries

by

Staff Writer

Consumers in Japan, both native and foreign, will pay sales taxes for overseas online purchases from Thursday for such things as e-books and music downloads in a policy change aimed to eliminate price advantages enjoyed by foreign-based companies over domestic rivals.

Consumers living in Japan have traditionally been exempt from taxation when purchasing products from foreign-based operators such as Amazon.com.

Under the new changes, Internet shoppers will pay an 8 percent consumption tax, which will rise to 10 percent in April 2017, regardless of where the companies they purchase from are located.

The Finance Ministry, which oversees the tax system, said the policy shift is intended to give domestic e-shopping operators the opportunity to compete with their overseas counterparts on a level playing field.

Major bookstore chain Kinokuniya, a strong supporter for the measure, welcomed the move.

“We have long lobbied for a change to the system because being levied differently depending on where we’re based is just not right,” said a Kinokuniya official.

“We wholeheartedly welcome fair competitive environments that come with the new system,” said the official, who declined to be named, citing departmental policy.

In 2013, Kinokuniya and other Japanese firms such as Yahoo Japan, Gyao Corp. and Internet service provider Nifty Corp. released an open letter protesting the system, saying it forces them to operate at a disadvantage amid the growing forays by foreign-based operators into their respective industries.

Some Japanese firms, they pointed out, have moved their servers abroad just to avoid the taxes imposed on shoppers in Japan, a situation they warned could not only result in the hollowing out of domestic industries, but ultimately reduce employment and corporate tax revenues at home.

Buoyed by the ever-increasing prevalence of smartphones and tablet devices, cross-border e-shopping has become significantly common in recent years.

According to Daiwa Institute of Research Holdings, market sales pertaining to e-books and music purchased from overseas providers totaled ¥35.2 billion ($292.9 million) and ¥23.1 billion, respectively, in 2012.

  • Rebane

    Kinokuniya should have lobbied for the abolishment of purchase tax for
    e-books altogether instead. I am furious about all this, because at my
    Finnish online bookstore, I have to pay 20% of VAT for each e-book I
    purchase my residency in Japan notwithstanding. Does the Japan’s
    ministry want to put extra 8% of purchase tax on Finnish e-books too?

  • Jamie Bakeridge

    Exactly how are they going to enforce payment of this tax on foreign websites? This is key point – these websites are beyond the scope of taxation and have been deliberately placed there.

  • Jamie Bakeridge

    Exactly how are they going to enforce payment of this tax on foreign websites? This is key point – these websites are beyond the scope of taxation and have been deliberately placed there.

  • BakaGaijin

    But wait. When I buy an English language book with a US credit card from Amazon, I am already taxed in the US because of having a required US-issued credit card. Now I will be double-taxed?

    • http://whiterabbitjapan.com Max Hodges

      >Furthermore, aren’t I already virtually taxed by Japan due to the massive drop in the worth of the JPY (>45% since I moved here) when I purchase in USD?

      it’s a mistake to conflate exchange rates with a tax

  • http://whiterabbitjapan.com Max Hodges

    considering how many Japanese studied economics in this country, they sure seem to lack a strong grasp of the basic concepts. Protectionist meddling in markets like this increases friction and hurts consumers. Many titles and items which could be imported in Japan are not available domestically. Taxing those purchases simply takes money from consumers budgets and transfers it government coffers; leaving consumers with less to spend in others areas–on food, education, clothings, etc. which hurts other areas of the economy.