Experts have voiced concerns about the Finance Ministry’s plan to use the upcoming My Number identity system to provide consumers with refunds on certain items and thereby soften the blow when the consumption tax is hiked to 10 percent from 8 percent in April 2017.

My Number cards will be distributed to all residents in Japan from January upon application. They will carry a 12-digit number and will identify the holder by name, address and date of birth.

The system is aimed at streamlining tax collection and the administration of social welfare benefits.

Shungo Koreeda, a researcher at Daiwa Institute of Research, cautiously welcomes the government’s proposal to offer refunds, saying it is a better idea than introducing a selective reduced tax rate. However, he argues against using My Number for it.

“In the first place, My Number cards will probably not be widely used yet in April 2017,” Koreeda said. “In addition, My Number cards carry very important personal information. Therefore it’s inappropriate to use them when making purchases.”

Under the ministry plan, customers would present their My Number cards when making purchases. The government would then collect and store purchase data to facilitate the refund.

Takanori Nahara, head of public affairs at the New Supermarket Association of Japan, warns of significant privacy issues, saying there is a high risk of loss of personal data at the point of sale.

“If customers use the cards in their daily shopping, it would require sensitive handling by retailers,” Nahara said. “Retailers would need to train their employees thoroughly on how to handle the cards.”

Nahara warns that if data were to leak, the retailer would suffer a loss of public trust.

“Retailers will have to bear the risk of information leakage” for as long as system is in operation, he said.

Furthermore, Nahara said it is unclear how data terminals would be installed in stores and who would cover the cost. Such terminals would be needed to read customers’ My Number cards.

“It sounds odd if the retailers need to invest in the data terminals as they only receive customers’ information on behalf of the national government,” Nahara pointed out.

The ministry plans to subsidize part of the cost of the terminals.

Meanwhile, Kazuoki Ono, co-representative of the Consumers Union of Japan, said he is afraid the government will store and use people’s purchase records.

Ono fears the records would become big data and at some stage could be used to the benefit of businesses, such as for marketing.

Consumers will pay 10 percent consumption tax on all items, but would be eligible for refunds of the 2-percent rise on some products. A reduced tax rate of 8 percent would be applied to all food and beverages, except alcoholic drinks.

The ministry is discussing setting an annual cap on refunds of ¥4,000 per person.

Nahara of the New Supermarket Association of Japan said the amount will be insufficient to encourage consumer spending after the tax hike.

“The cap is not necessary. If there is no limit for the refund, people might think about buying more expensive items,” Nahara said. “The cap could stifle consumer confidence.”

Meanwhile, Koreeda of Daiwa Institute of Research recommended loosening the cap for low-income individuals.

He furthermore suggested that the government provide the money equally to everyone instead of in the form of refunds, given the complicated nature of the proposed system and the cost of setting it up.

On the other hand, Ono of the Consumers Union of Japan said he believes it is better to offer a reduced-tax system than refunds when considering the interests of low-income households.

“Tax refunds would probably not benefit families living in poverty,” Ono noted, pointing out that the 10 percent tax rate would represent a heavy burden for them.

Information from Jiji, Kyodo added

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