6 Learn about Consumption Tax

Transcription

1 Learn about Consumption Tax 1 About Consumption Tax Consumption tax is levied widely and fairly on consumption in general. In principle, sales and provision of all goods and services in Japan are subject to consumption tax. While the tax is imposed on sales of business entities as taxable person, they may deduct tax on purchases from that on sales and pay the remainder to prevent tax accumulation. Consumption tax paid by business entities is added to sales prices as cost and supposed to be bore by final consumers (in contrast to income tax called direct tax, consumption tax of which taxable person and actual tax bearer are different is called indirect tax ). The system of addition of consumption tax to prices Business entities may deduct tax on purchase from that on sales and pay the remainder Product producers Wholesalers Retailers Consumers Taxpayers Taxpayers Taxpayers,4 (Tax 4) 7, (Tax ) 1,8 (Tax 8) Consumption tax Tax to be Paid Consumption tax Tax to be Paid Consumption tax 24 Tax to be Paid In the end, the consumers bear the 8% consumption tax * Calculated with an 8% tax rate

2 2 About the Comprehensive Reform of Social Security and Tax Since the basic framework of the current social security system was built in the s, the socioeconomic situation which is the premise for the social security system has dramatically changed. While social security benefits have grown greatly in line with aging population, social insurance premiums have failed to catch up with the benefit expansion, with the premium-benefit gap widening. The gap has been covered not only by tax revenues but also by massive debt issues. If this situation does not change, it may become difficult to sustain the present social security system. However, we must maintain the social security system that Japan boasts to the world which supports livelihood of citizens including older people such as your grandfathers and grandmothers, and which contributes to the world s highest life expectancy. Relationship between Premiums and Benefits [Sources] Financial Statistics of Social Security in Japan FY4 by National Institute of Population and Social Security Research; data for FY are from the Ministry of Health, Labour and Welfare (on an initial budget basis) ( 1 trillion) 1 8 Benefits Benefits 1.3 trillion Long-term care/welfare Others 23.7 (Including 1. for long-term care) Healthcare 37.9 Financial resources 111. trillion + Asset income Asset income, etc. Local government contribution 13.1 National government contribution 32.2 Mostly debt Public funds Premiums Pension.7 Premiums (Year) FY FY

3 Therefore, we must secure stable financial resources for maintaining the social security system to improve Japan s fiscal situation which is in a more difficult situation than in foreign countries. Through reform of tax system including the consumption tax, to secure stable financial resources Expanding and stabilizing social security Childcare facilities, expanding home medical care, promoting dementia measures, reducing premiums, etc. + Addressing benefit growth under aging population to stabilize current social security system (Securing stable financial resources) Simultaneous Attainment Achieving fiscal consolidation targets Overcoming the worst fiscal situation among major countries Seeking to halve the national and local government primary budget deficit as a percentage of gross domestic product from FY to FY, achieve a primary budget surplus by FY22 and reduce outstanding government debt s ratio to GDP stably later Increasing the consumption tax rate (national and local) in stage to 1% by October 9 Given that consumption tax is contributed by all people including senior citizens and brings in stable revenues, consumption tax revenues are destined to cover social security. All increase in consumption tax revenues goes to social security!! Stabilizing the payment of basic pension benefits 14 trillion This will build a stable system which decreases the debt that will be placed onto the future generations. 3.2 trillion 2.8 trillion.8 trillion 7.3 trillion Child and childcare support, healthcare and long-term care, and public pension system will be improved. The increase in expenses due to the increase in consumption tax will be handled. * The increase in consumption tax revenues due to a % increase (for the whole fiscal year). It includes the amount of secured financial resources in regards to the decrease in revenues due to the implementation of reduced tax rate system.

4 To be more specific, (1) Expand and diversify childcare facilities, aim to eliminate the problem of children on the waiting list for childcare facilities, and enhance parenting support, such as increasing parenting advice and temporary custody. (2) Develop hospital, home medical care, and long-term care arrangements to allow citizens to use medical and long-term care services in familiar community. For serious or sudden illnesses Hospital for high-degree acute phase Hospital for recovery phase Hospital for acute phase Intensive care with the aim of rehabilitation Integrated management Building of systems which coordinates consultation operations and services for a smooth provision of services related to lifestyle such as healthcare, long-term care, and housing. Community General Support Center Care Manager Daily healthcare Comprehensive care system Outpatient visits, Healthcare home medical care, home nursing, pharmacies, etc. Housing Home and Elderly Housing with Care Provided Long-term care Outpatient, home nursing, nursing care, etc. Supports older people s lifestyles through home visit long-term care, and nursing services as well as multifunctional small group home. Advanced and highquality healthcare and attentive nursing care Quick recovery under an intensive care Intensive rehabilitation depending on the condition Hospital for chronic phase Lifestyle Support Preventive Care Overseeing from multiple angles such as older people s clubs, local government associations, volunteers, and non-profit organizations and improving lifestyle support services (3) Increase government s share of basic pension benefit payments to % permanently and stabilize payment of pensions. Expenses Benefits Premiums expense Raised to % Basic pension payment in the future Government s expense 2

5 3 About the Reduced Tax Rate System for Consumption Tax The reduced tax rate system for the consumption tax will be implemented from October 1, 9, for foods and drinks excluding liquors and eating-out services and subscribed newspapers published twice or more a week to give considerations to low-income people after the consumption tax hike. The consumption tax rate for these goods will be 8% (.24% in national tax and 1.7% in local tax), (the standard tax rate will be 1% (7.8% in national tax and 2.2% in local tax). Images of Tax-reduced Goods (Drinks and Foods Excluding Liquors and Eating-out Services) Eating-out Services Takeout Food and drink services that business entities provide to customers at sites with dining equipment (including tables, chairs, and counters) designed for such services Catering and Cooking Services Food and drink services provided at sites designated by customers Liquors [Liquors defined in the Liquor Tax Act] Foods and Drinks (Foods defined in the Food Labeling Act) * Goods provided for human drinking or eating Foods and drinks provided at fee-based home for the elderly, school lunches, etc. Combined product Drugs and Quasidrugs [How to handle combined product] Where food is sold together with goods other than food as one combined product, such combined product will be treated as foods and beverage and the reduced tax rate is applied if the price of the product (excluding tax) is less than JPY 1. and 2/3 or more of the price relates to food. (only if the price of the product alone is posted) * The colored part is the items eligible for a reduced tax rate.

6 The new system, so called the invoice-based method, will be introduced in October 223. So that the tax amount can be calculated properly under the multiple tax rate system. For four years from October 9 until the invoice-based method is introduced, the simplified transitional method (Separate accounting invoicebased method and special measure for the calculation of the tax amount) will be provided. Simple invoice-based method (Current System) Separate accounting invoice-based method (Simplified System) Invoice-based method (Invoice System) October 1, 9 October 1, 223 Transitional Period (4 years) <Reference> International comparison of value added tax rates (standard rates and rates on food) (%) (As of January 7) Legend Standard tax rate Reduced tax rate Taiwan Vietnam Thailand Singapore Philippines Malaysia Laos Indonesia Cambodia China South Korea Japan Turkey Switzerland Norway New Zealand Mexico Israel Iceland Chile Canada Australia Romania Malta Lithuania Cyprus Croatia Bulgaria U.K. Sweden Spain Slovenia Slovakia Portugal Poland Netherlands Luxembourg Latvia Italy Ireland Hungary Greece Germany France Finland Estonia Denmark Czech Republic Belgium Austria EU OECD OECD ASEAN+3 [Notes] 1. Japan s consumption tax rate at 8% includes 1.7% in local consumption tax (local tax). 2. In Canada, most provinces impose value added and other provincial taxes in addition to the federal good and service tax (value added tax) (e.g. 8% in Ontario). 3. In the United States among the member countries of the Organization for Economic Cooperation and Development, instead of any value added tax on transactions, retail sales tax (local tax) is levied by state, county and municipal governments (e.g. a combined 8.87% imposed by New York State and City). 4. In Myanmar among the members of the Association of Southeast Asian Nations, a transaction tax is imposed as tax on sales. No sales tax exists in Brunei.. In the above figure, blue bar portions represent tax rates on food. Scopes of food subject to reduced tax rates differ from country to country. Some food products may be handled differently from the above indication.. The EC directive denies any zero tax rate or any reduced tax rate below %. [Source] Interviews with relevant embassy officials, the European Union and other relevant government websites, etc. 22