The government is considering simplified invoice rules to help small businesses cope with the administrative burden of handling two different tax rates when the planned consumption tax hike takes effect in April 2017, sources said Thursday.
The Abe administration aims to introduce a lower rate on daily necessities such as food and other items to alleviate the impact of the consumption tax increase on consumers, but business groups are opposed to the plan, believing it will be too cumbersome for businesses.
Previously, the Liberal Democratic Party panel was cautious about a reduced tax rate, mainly because of concerns about the increase in accounting and related work at small and midsize businesses that would result from the use of two different tax rates.
But the panel decided to consider the special rate after Prime Minister Shinzo Abe, as LDP president, called for serious discussions to introduce the reduced rate in April 2017, in line with a request from Komeito, the LDP’s partner in the ruling coalition.
On Wednesday, Abe instructed directed Yoichi Miyazawa, chairman of the ruling Liberal Democratic Party’s Research Commission on the Tax System, to consider a practical way to prevent accounting confusion.
The government is eyeing invoice rules that are looser than those in European Union countries that use reduced sales tax rates.
After an executive meeting of the LDP tax panel Friday, the first after the new LDP tax chief was appointed, Miyazawa told reporters he will study how to implement a dual tax rate.
According to participants of the meeting, the panel will decide what kind of items will fall under the lower rate.
In previous meetings, various food products, drinks (excluding alcohol), perishables and polished rice have been suggested.
Komeito’s proposal for the special rate to cover a wide range of items drew opposition from some LDP members, who worry about a reduction in revenue following a two-point tax hike.
“We need to spend a lot of time considering various things,” Miyazawa told reporters after the meeting.