A Technological Approach to Reforming Japan's Consumption Tax

22 Pages Posted: 14 Dec 2013

See all articles by Richard Thompson Ainsworth

Richard Thompson Ainsworth

NYU - Graduate Tax Program; Boston University - School of Law

Date Written: December 13, 2013


Significant change has been forecast for the Japanese Consumption Tax. Revenue needs are pressing, and the Consumption Tax appears to be underutilized. Should the rate be doubled from 5% to 10%, or more? If so, will rate increases necessitate further structural changes – recasting this annual credit-subtraction levy into a European style credit-invoice VAT? These options have not proven to be politically palatable, but they are directions that have been under active consideration.

On October 1, 2013 the Japanese Cabinet Office announced that the Consumption Tax would rise from 5% to 8% effective April 1, 2014. The rate will increase again to 10% on October 1, 2015. Details will be incorporated into the 2014 budget, and the expectation is that the tax increase will be offset by investment incentives. The reforms should be based on the Tax Reform Proposal to Stimulate Non-governmental Investment drafted by the Liberal Democratic Party Tax Commission. If this proposal goes forward Japan’s Consumption Tax would remain largely unchanged. The suggestions to move toward a European VAT will be rejected.

Although the tax rate increase to 8% may not be difficult to implement, the further increase to 10% may necessitate some exemptions for the elderly and handicapped. This paper proposes technology-based solutions.

Keywords: VAT, Consumption Tax, CT, Japan, SSUTA, Streamlined Sales Tax, Biometrics, Exemption, Tax Reform, Digital VAT, D-VAT

JEL Classification: E62, H20, H21, H29, K34

Suggested Citation

Ainsworth, Richard Thompson, A Technological Approach to Reforming Japan's Consumption Tax (December 13, 2013). Boston Univ. School of Law, Law and Economics Research Paper No. 13-56, Available at SSRN: https://ssrn.com/abstract=2367318 or http://dx.doi.org/10.2139/ssrn.2367318

Richard Thompson Ainsworth (Contact Author)

NYU - Graduate Tax Program ( email )

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