With the Abe government planning to raise the consumption tax rate to 10 percent from 8 percent on Oct. 1 next year, businesses are worried about the extra burden of a consumer-friendly relief measure.
Prime Minister Shinzo Abe made clear his intention to raise the tax as planned when he met the press on Sept. 20. The hike has been postponed twice.
To limit the influence of the higher rate on households, however, the government will keep the tax rate at 8 percent on food, beverages and newspapers, resulting in Japan’s first tax breaks under the consumption tax system.
The lower rate will not be applied to alcoholic drinks or food served in restaurants.
The reduced rate “is expected to ease the burden on households,” said Taro Saito, director of economic research at NLI Research Institute.
Retailers and the food service industry are among the sectors that must prepare for the planned multiple rate system. Stores selling items subject to the regular rate and those to be taxed at the reduced rate will need cash registers that can handle both.
Adding to the complexity, different rates could be applied to the same item depending on the situation.
At stores equipped with areas where customers can eat or drink their purchases, food products will be taxed at 8 percent if they are for takeout and at 10 percent if they are consumed on the spot.
An official at a major restaurant chain offering bowls of gyūdon beef on rice said the reduced tax rate may encourage people to opt for takeaway, forcing the company to prepare more takeout containers and thus shoulder higher costs.
Another problem will be what to do with products that include both food and nonfood items, like snacks that come with toys.
A tax reform law enacted in March 2016 stipulates that the reduced tax rate be applied to products that are priced at ¥10,000 or lower before tax and for which food accounts for two-thirds or more of the total price.
But a senior official of the Tokyo Chamber of Commerce and Industry said, “I doubt whether all employees will be able to answer correctly when consumers ask” about the price makeup of individual products, which may lead to confusion.
A survey conducted by the Japan Chamber of Commerce and Industry found that some 80 percent of small and midsize companies have not yet started preparations for the reduced tax rate.
Retailers now only have a year left to introduce new cash registers, train staff and make consumers aware of the tax differences.
The reduced tax rate is “a headache,” a senior official of the Japan Chain Stores Association said.