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

by Tomohiro Osaki

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.