Tax & Accounting Blog

Japan Considering Increasing VAT Rate by 2015

Indirect Tax, ONESOURCE, Sales and Use Tax, VAT Tax Rates December 30, 2011

Japan’s JiJi Press reports that the ruling Democratic Party of Japan (DJP) will propose a two-step hike in the national consumption tax to 10% from the present 5% by 2015. At 5%,  Japan’s consumption tax is currently one of the lowest in the world well below the European average rate of 20%. Details of the proposal and when it would potentially take effect are expected to be released by the end of the current fiscal year. Prime Minister Yoshihiko Noda has stated that he believes the increase is necessary to cover growing social security costs. The proposal is far from universally popular and is unlikely to enjoy smooth sailing. Some DPJ members oppose raising the tax and opposition parties also are expected to put up a fight, arguing that a consumption tax hike would be devastating to the already weak economy.