• Kyodo, staff report

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The government and ruling parties have decided to abolish the system allowing foreign students and other long-term residents to make duty-free purchases in response to suspected cases of reselling and complaints of cumbersome eligibility checks, sources said Sunday.

Under the current system, which will be revised as part of tax reforms for fiscal 2022, foreign students staying long-term in Japan and not working part-time can make tax-free purchases within six months of entering the country.

Criticism has arisen over the labor-intensive checks duty-free stores have to perform at the time of sale to confirm a student is not working, while others have complained it is unfair that stores with lax screening procedures end up attracting more customers.

The National Tax Agency also discovered many suspicious "binge buying" cases by foreign students after introducing a system to digitize purchaser information in April last year.

It believes they may be buying large quantities of duty-free goods to resell at higher prices, including a 10% consumption tax, to make a profit.

As part of tax reforms, the government and the ruling coalition led by the Liberal Democratic Party plan to narrow the eligibility of duty-free purchases to tourists and those with a short-term visa of 90 days or less, instead of nonresidents under the country's foreign exchange and foreign trade law, according to the sources.

While it remains to be seen when Japan will reopen its borders to short-term visitors due to the emergence of the omicron coronavirus variant, the government intends to ensure proper operation of the system as tourism demand recovers.

The Yomiuri Shimbun daily reported, citing sources, that records of purchases by some 26,000 people, totaling around ¥40 billion, were sent to the tax agency from roughly 30,000 duty-free stores nationwide by June this year.

A total of 1,837 people have made duty-free purchases of more than ¥1 million, out of which more than 80% were Chinese, including students. Sixty-nine people bought items worth more than ¥100 million, and the largest value of purchases was by a Chinese customer who bought 32,000 items duty free, worth more than ¥1.2 billion.

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