Takaichi Administration Mulls 1 Pct Tax on Food from Next April

Tokyo, June 2 (Jiji Press)–The administration of Japanese Prime Minister Sanae Takaichi is considering lowering the consumption tax rate on food to 1 pct for two years from next April, despite her campaign pledge of a zero pct tax rate in February’s general election, it was learned Tuesday. The move comes as a tax cut to 1 pct would require less time to update cash register systems and could be implemented sooner. The government and ruling parties plan to decide which option to adopt based on discussions at a suprapartisan national council and public opinion. On Wednesday, the National Council on Social Security will hold a working-level meeting to accelerate discussions on a consumption tax cut for food, as well as a refundable tax credit program. The council aims to reach an interim agreement by the end of the month. During the council’s hearings thus far, major cash register system vendors have said that it would take around one year to adjust systems for a zero pct consumption tax rate, but only around half a year for a 1 pct tax rate. Within the government and ruling parties, there is growing support for modifying Takaichi’s election pledge in order to tackle rising consumer prices swiftly. Nevertheless, even the 1 pct option would present challenges, especially in securing about 4 trillion yen in annual funding for the tax cut. Takaichi has said that the government will not rely on deficit-covering bonds, but it is unclear whether this will be possible. To avoid possible public criticism of the 1 pct scenario, the government may spend about 600 billion yen, equivalent to the revenue from a 1 pct tax rate, on subsidies for updating cash registers. Meanwhile, many experts and industry representatives at the national council have called for the early introduction of the refundable tax credit program while forgoing the consumption tax cut. END [Copyright The Jiji Press, Ltd.]