Japan ponders internet sales taxBy Anna Watanabe Jun 30, 2012 12:57PM UTC
It’s been less than a week since Prime Minister Yoshihiko Noda fought back disputes and rebellion from his own Democratic Party of Japan to pass the infamous 10 percent sales tax.
But already the Finance Ministry has begun considering the introduction of a consumption tax on items bought over the internet including books, music and other downloadable content. If introduced, the tax would reportedly be similar to the European Union’s VAT (value-added tax) on online products.
The Japan Times reports that should the new internet tax be introduced, it would take effect in April 2014, at the same time the national sales tax will be raised to 8 percent. Japan’s current sales tax is 5 per cent – 4 percent national and 1per cent prefectural.
The article reports that the aim of the tax is to provide a “level playing field for domestic providers on inline content.”
“The ministry will try to ensure fairness over online content transactions so that domestic vendors will not be put at a disadvantage,” Finance Minister, Jun Azumi said at a news conference.
While it may seem unfair, talks of reigning in Japan’s online purchasing are not necessarily surprising.
Recently, the Upper House of the Japanese Diet approved revisions to the nation’s copyright laws to include jail time and heavy fines for illegally downloading copyrighted material.
According to gaming website Wired, offenders face a two-year jail sentence and fines of up to 2 million yen (over $US 25,000).
What’s more, last week it was revealed that the number of counterfeit, brand-name items seized in Japan has exploded in recent years.
The Japan Times reports an almost 16 percent increase on illegal goods bought on the internet and brought into Japan.
The most popular items, including handbags, iPhone cases and shoes, are largely manufactured in China and Hong Kong. The Cross-Border Consumer Centre Japan said Internet shopping and the strong yen have encouraged Japanese residents to take advantage of the cheaper, foreign items.
While counterfeit items found to be imported into Japan will still continue to be seized at customs, the introduction of the internet sales tax hopes to curb domestic transactions and goods imported from countries with cheaper manufacturing costs.
Goods purchased from websites where transactions are treated as taking place outside of Japan, such as Amazon.com will remain un-taxed.
While these two issues have more to do with black market activities and copyright issues, it’s clear that Japan is looking to crack down on where and how money is used within the nation’s economy in an attempt to keep the wheels of the economy turning.
But is Japan jumping the gun?
Already several economists have foreshadowed that by doubling the consumption tax, the Japanese Government could be unintentionally forcing the already declining economy into a nose-dive.
UBS economist Takuji Aida told Bloomberg he predicts a burst of fiscal growth before the consumption tax is introduced in April 2014 before it flatlines in the years following.
“If there are no economic stimulus measures along with a consumption tax hike we can see around zero percent growth in fiscal 2014,” he said.
If domestic products are too expensive and internet shopping is also hit, will any good come of the consumption tax?