Tax Increase Hits Japan! Information On Reduced Tax Rates To Get You Prepared

On October 1, 2019, Japan’s sales tax rate was finally raised to 10 percent.
Putting aside the topic of political situations, and the securing of financial resources for social security, it is inevitable that this rise will incur some impact on the household budget. According to estimates, the burden on each household finance would be increased by around 40,000yen in one year (as of 2020). It’s not something one can let slide so easily.

Here, you’d want to understand one key term: reduced tax rates.

As a countermeasure for low-income earners, this system is applied to a portion of products; for such products, the tax rate is reduced from the standard tax rate.
To be specific, tax rates on certain goods will not be raised to 10percent, and will instead retain the original tax rate.

What exactly are these products, and what are the requirements for them to be eligible for reduced tax application?
Several issues have been discussed in the news considering reduced tax rates due to the ambiguity of its rules.

Why is the tax for this product 10 percent?
To avoid such confusion when making a payment, it is best to gain deeper understanding in advance.

Then, what are the products that are eligible for having reduced tax rates (or, in other words, retain their original tax rate)?

Roughly speaking, there are two types.

Products With Reduced Tax Rates (1) Newspaper

The first item is the newspaper. To reduce citizens’ costs for acquiring knowledge, newspapers are categorized as crucial items: for gathering information, satisfying one’s intellectual curiosity, and as entertainment in the form of reading.

However, not all newspapers apply to this system.
They must be subscribed papers that are being published more than twice a week. Not just one, but both of the above conditions must be satisfied.

For example, if you were to purchase a sports newspaper (e.g., Sports Nippon) at a station stall, the tax rate will be 10 percent.
Sports Nippon newspapers are published daily, so it does meet half of the requirements. However, purchasing them at a station stall means you didn’t subscribe for it.

There is one important point regarding newspapers.
Personally, this seems odd to me, but rules state that electronic newspapers read online do not fall under the category of newspapers, and therefore will not be applied the reduced tax rate.
Aren’t they the same considering they both give out crucial information for our daily lives?
Regardless of what we may think, be noted that electronic newspapers are excluded from reduced tax rates.

Products With Reduced Tax Rates (2) Food And Beverages

The next item is food and beverages.
Based on Japan’s law, Food Labeling Act, this excludes dry ice for cooling and pet food.

The exceptions here are eating-out, and alcohol drinks.

Alcohol drinks, such as beer and whiskey, are easier to tell apart. The problem in many cases is the exceptions of eating-out.
Well, it isn’t exactly a problem, rather a thing that causes confusion among consumers at eat-outs.

For example, say a mother and her child went to eat at a sushi restaurant. They both had their sushi at the restaurant. Later, they purchased a box of sushi to go for the father who was going to get home late from work.

In this case, tax for the mother’s and child’s sushi eaten at the restaurant would be 10 percent, whereas the tax for the father’s takeaway sushi would be 8 percent.

I hope this makes sense. However, this example may still be easier to understand since the two were clearly “eating-out”.

Numerous Complicated Cases As Well As Grey Areas

①
Purchase a rice ball at the convenience store to eat at home→8%
Purchase a rice ball, then eat it at the convenience store’s eating area→10%

From now, when purchasing food at convenience stores, you’ll probably be asked if you are going to eat it at the eating area.
It would be very troublesome for the cashier if the customer were to buy a lunch and a sweet bread; the lunch for eating at the store, and the bread for taking home.

②
Oronamin C drink→8%
Lipovitan D drink→10%
Reduced tax rates are applied to medicament and quasi-drugs. Therefore, tax for Lipovitan D drinks (quasi-drugs) are 10%, but tax for Oronamin C Drinks (soft drinks) are 8%.

③
Lunches purchased in Shinkansen (bullet trains)
Lunches sold from trolley carts with no food&drink menus→8%
There was a food&drink menu at the seat→10%

Even for me as I write this article, it is getting too complicated to catch up.

Here’s another case: if you purchased food for takeaway, but ended up eating it at the store or in the Shinkansen, how much would it cost?
The 8% reduced tax rate would still apply, since you initially purchased it to go.
Then, won’t everyone just order food to take away? For the meanwhile, rules are rules, the government will have to take measures if such issues arise too often.

I don’t mean to find fault, but honestly, there are too many complicated exceptions regarding this law that it is really difficult to understand it completely.

[Writer’s Comment]

The reduced tax rate is implemented as a transitional measure.
In other words, the rules are temporarily softened in order to allow the new system to be brought in gradually. Basically, it is likely that taxes will eventually rise to 10% for all products.

It may seem useless to deepen the understanding of reduced tax rates, if all taxes are going to end up being the same sooner or later.
Still, I hope this article would be of some use for when you go shopping.