Tax & Accounting Blog

Consumption Tax Increase Dampens Consumption.

Blog June 3, 2014

Retail sales in Japan fell 13.7% from the previous month, which exceeded estimates of 11.7%. The drop off in April was after Japan’s 3% increase in the consumption tax from 5% to 8%. This was the first increase in 14 years. The economy will shrink in Q2, however, it is expected there will be a recovery in household spending in the second half of the year. The IMF has stated that “successive consumption tax increases are critical to establish a track record of fiscal responsibility.”

Source: http://www.bloomberg.com/news/2014-05-28/japan-retail-sales-slide-in-april-after-consumption-tax-increase.html

Source: http://www.imf.org/external/np/ms/2014/053014.htm

By Anil Kuruvilla, Senior Manager, Tax Research & Content