Japan Plans to Cut Food Consumption Tax to 1% from April 2027

(Taipei, June 18, 2024, CNA) Japanese Prime Minister Sanae Takaichi stated that the government plans to reduce the domestic consumption tax on food and beverages from the current 8% to 1% starting in April 2027, emphasizing the need for timely and sufficient implementation of the tax cut.

According to Kyodo News, Takaichi mentioned at a post-summit press conference following the Group of Seven (G7) summit held in France yesterday that the Japanese government is currently coordinating based on a proposal from the chairman of the "National Conference on Social Security."

The report analyzes that this tax reduction plan is intended to reaffirm Takaichi's determination to fulfill the tax cut pledge made during the general election in February of this year, and it is equivalent to approving the "1% plan," which has been the most vocal proposal within the government.

Takaichi also stated that she will closely monitor the progress of the "National Conference on Social Security" negotiations and emphasized, "We hope to ensure the timeliness and adequacy of the tax rate reduction."

The cross-party "National Conference on Social Security" in Japan has been discussing the reduction of the consumption tax on food and beverages. Its working group chairman, Liberal Democratic Party (LDP) Tax System Research Committee Chairman Itsunori Onodera, proposed a plan yesterday to reduce the tax rate from 8% to 1% over two years, starting in April 2027.

The plan proposes using tax revenue equivalent to 1% of the consumption tax, approximately 600 billion yen (about NT$118 billion) annually, as financial resources. It is expected that around autumn 2027, a "targeted subsidy measure linked to income" will be introduced, and this policy will be interpreted as the consumption tax being "effectively zero."

The LDP and the Japan Innovation Party had advocated for a two-year zero consumption tax rate on food and beverages during the general election. The report suggests that the current proposal of "effectively zero" is an adjustment made to align with those previous campaign pledges.

However, the Sankei Shimbun reported that opposition parties in Japan have expressed backlash against this plan. Motohisa Furukawa, chairman of the National Democratic Party's Tax System Research Committee, criticized, "This is content that has never been discussed in the practical working group meetings before."

Although the Japanese government aims to pass the relevant bill in the extraordinary Diet session to be convened this autumn, the report states that a comprehensive update of cash register systems would require about six months of preparation time after the tax rate is reduced to 1%.

If the ruling and opposition parties can reach a consensus and finalize the system details, preparations for updating the cash register systems can begin even before the bill is officially passed.

Onodera emphasized, "If we wait until the bill is passed to start, we will absolutely not make it by the April launch next year. This requires the cooperation of all parties."

The report also points out that there are still dissenting voices within the LDP. Since the LDP's campaign pledge in the general election in February of this year was to "zero out the consumption tax on food and beverages," some mid-career lawmakers are advocating for "directly achieving 0% as per the pledge."

Furthermore, there are voices within the party that are negative about reducing the consumption tax itself, making it difficult to predict whether opinions can be smoothly integrated moving forward. (Compiled by Li Jing / Reviewed by Chen Yan-chun) 0618