Japan Data

Businesses Warming to Consumption Tax Hike but Concerns Linger


There is growing awareness among businesses that Japan cannot postpone dealing with its mounting fiscal woes. A recent national survey gauging sentiment toward next year’s scheduled consumption tax increase found that a slight majority of firms are in favor of going ahead with the tax hike.

A nationwide survey of businesses conducted by Teikoku Databank revealed that opinions are now almost evenly divided regarding government plans to increase the consumption tax from 8% to 10% in October 2019. A total of 43.3% of respondents said that the tax increase should be introduced as planned, while 43.1% called for it to be postponed, the current tax rate to be maintained, or for the tax rate to be decreased. The results show a conspicuous rise in the number of companies backing the timing of the tax hike compared to a 2014 survey. The difference reveals a significant change in the outlook on taxation as Japan begins to feel the effects of its falling birth rate, aging society, and subsequent mounting social security burden on younger generations.

Larger companies surveyed were more likely to support the tax increase, whereas smaller ones were more inclined to prefer maintaining the current consumption-tax level or lowering it.

Although the consumption tax will be raised to 10%, food and beverages excluding alcoholic drinks and restaurant purchases will still be taxed at 8%, as will subscription costs for newspapers published more than twice a week. This has raised concerns among businesses about possible confusion. A retailer from Kōchi Prefecture commented that if the tax is going to be raised, then the government should make the system as simple as possible. An automobile dealer from Fukushima Prefecture expressed concern that tax exemptions will lead to market confusion, and has been seen in the past consumption will suffer.

Around half of the business surveyed expect the tax hike to have a negative impact, with 34.2% citing potential effects on business results and 20.9% pointing to other possible problems. Meanwhile, 27.6% of companies surveyed said that the tax hike would have no impact.

Over 80% of retailers were concerned about the negative impact of the tax hike, with 62.8% worried about the effect on business results and 18.4% pointing to other problems.

(Translated from Japanese. Banner photo © Pixta.)

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