Consumption Tax Increase in Japan

tax_increase Image © Alessandra

You know how most items in the 100 yen shop are actually 105 yen? I was horrified to hear that from April 1, 2014, those 105 yen items will go up to 108 yen when the consumption tax goes from 5% to 8% in Japan.

My poor, stingy heart almost gave out when a coworker told me that the consumption tax in Japan will then go up to 10% October 2015. I managed to convince my heart to keep going — mostly by reminding it that seeing the doctor costs money.

The 100 yen shop example is the most obvious, but what other items and services will be affected by the consumption tax increase? The Japanese National Tax Agency website provides information about what is and isn’t taxed under the consumption tax (called 消費税 – shouhizei).

Items Subject to Consumption Tax

According to the Japanese National Tax Agency website, the following types of transactions fall under the consumption tax:

  • The transfer of property, fortune, assets, etc. (or of labor) by a business person as a business to gain profits.
  • The import of foreign cargo, assets, etc.

Basically, most goods, services, and utilities, in short, “consumables,” are taxable. Some items are tax exempt, though, so read further to find out what items will not be affected by the consumption tax increase. In reading these lists, keep in mind that these are aren’t exhaustive, definitive lists. If you want more information, you should read the National Tax Agency website or contact the National Tax Agency directly.

Below are some of the items which will be directly affected by the consumption tax increase.

Taxed Items

  • General goods and merchandise
  • Food services (restaurants, etc.)
  • Parking space rental
  • Office rental
  • Travel expenses (in Japan)
  • Lodging expenses (in Japan)
  • Travel allowance (as provided by employer)
  • Electric charges
  • Gas charges
  • Water charges
  • Phone charges
  • Bank transfer fees

Items Not Subject to Consumption Tax

Tax-exempt items are items that normally would be taxed under the consumption tax but that are not subject to taxation under consideration of social policies. There are special categories of tax exempt items, but I will only be listing some of the itmes which fall under the Japanese word 非課税 (hikazei, tax-exempt) and apply to in-country transactions.

Untaxed items are items which clearly don’t meet the guidelines for being subject to consumption tax and are therefore not taxed under the consumption tax. In short, both tax-exempt items and untaxed items will not be affected directly price-wise by the consumption tax increase in Japan.

Below, you can read about some items that are tax-exempt or untaxed under consumption tax.

Tax-exempt Items

  • Life-insurance premiums
  • Postage stamps
    • – the price of stamps will be going up in April 2014
    • – stamps themselves are tax-exempt, but the delivery charge is taxable.
  • Revenue stamps
    • – the stamps used when paying for visa handling fees, etc.
  • Gift cards, prepaid cards
    • – when the recipient of the card buys something, consumption tax will be charged on that item
  • Credit fees
  • Residential-use rentals, like apartments, etc
    • – some of my friends have seen their apartment rental prices rise, but this is not a directly because of the consumption tax increase.
  • Schooling fees/class fees
  • Textbooks
  • Midwivery services
  • Housing loan

Untaxed Items

  • General salary/wages, bonuses
  • Social insurance premiums (health insurance, pension, etc.)
  • Donations
  • General memberships
  • Fines

Further Reading

For more information about the tax increase check out the following links:

English:

Japanese:

What do you think of the consumption tax increase? Are you pinching pennies or not too worried?

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  • flo

    noooo~! – and i here i was hoping to WOOF in japan after 2015 T_T – is there no help? 助けって!

    • http://wandertokyo.com/ LynnAllmon

      WWOOF, awesome! I did that about four or five years ago in Japan and highly recommend it. You can use train passes and highway buses to save on transportation. Also, your host will feed you and house you, so all you have to pay for is the one-year WWOOF membership fee (about 5500 yen) and sightseeing. Even then, your host will probably pay for a lot of the sightseeing tickets and such. Like I said, WWOOF is a wonderfully thrifty and authentic way to see Japan. I hope you aren’t deterred by the 10% sales tax ;)

  • KazeAndi

    between inflation and raising taxes, it’d be nice if my salary’d go up, too. which it doesn’t.

    • http://www.gaijinpot.com/ Anthony Joh

      I think part of Abenomics is to try and get companies to increase salaries. We’ll have to wait and see if he will be successful.

  • Marie

    These is getting worse , poor residents will suffer just to survive ,what about the salary ? how could everyone cope up to pay those keep on increasing taxes ? I guess everyone will work triple as hard .

  • Mike Wyckoff

    About to have my contract renewed but, alas no increase in wage or benefits…abenomics can kiss my a$$ or lack of $$

    • bartonim

      When I arrived in Japan in 1995, the standard monthly rate for foreign teachers was 250,000/month. If I am not mistaken, eikaiwa and other companies in the business of providing English lessons were obliged by law to offer that as a minimum. At some point, that rule was dropped, so that’s why, after nearly 20 years here, a company can pay me less. Some still offer more, and considering many goods and services remain at the same price they were from about 1996. I recall train fares and vending machine drinks going up right about that time, but nothing really significant since then. Basically, we have been pretty lucky. The sad thing is, schools now ask for higher qualifications at less money than anyone with a simple uni degree got over two decades ago.

      • Mike Wyckoff

        I agree completely with you. When I came over in 97, people had just started to whisper the word “stagnant economy”….ahhh, the nostaligia

  • Dex Van Hunen

    this is really not a big deal… 3 %… timing wise maybe not the smartest but anyways its a far cry from some other countries where there is 20% VAT

  • http://www.standingmist.com ikari7789

    Overall, not too concerned with a 3% increase in tax. The extra 2% next year will make it feel like way more once it raises to 10%, but still it could be much worse, as in Europe and some places in America where it’s around 20%. And thankfully consumption tax in Japan is set federally. I can imagine it would be quite a bit higher in Tokyo if it was set at the prefecture level. I’m glad that wages aren’t subject to consumption tax as they’re already taxed as income…

    • http://wandertokyo.com/ Lynn

      That’s a good way to think about it. Also, I heard some good news: the government seems to be considering lowering the tax on certain items (food, other necessities) if enough funds are raised sometime in the future.

  • mchan1

    It’s not a big deal… Yet!

    Stateside, many states impose their own sales tax which ranges between 4-9.5% and that’s just sales tax, not including income tax, for those states that also impose one :(

    Just have to watch your budget more efficiently ;)

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