Japan Leaning toward 1 Pct Consumption Tax Rate for Food

Tokyo, June 3 (Jiji Press)–Japan is leaning toward the idea of cutting the consumption tax rate for food to 1 pct next April, as such a reduction can be implemented more quickly than the original plan to lower the rate to zero pct. On Wednesday, the multiparty National Council on Social Security held a meeting of working-level officials to discuss problems that must be resolved to carry out the proposed two-year tax cut. Government officials explained that the reduction to 1 pct would take about a half year to make preparations, mainly updates to cash register systems, while the zero pct plan would require about one year. The zero pct plan was an official promise Prime Minister Sanae Takaichi made in the February election of the House of Representatives, the lower chamber of the Diet, the country’s parliament. But members of the government and the ruling camp led by Takaichi’s Liberal Democratic Party are increasingly supporting the plan to lower the rate to 1 pct early amid protracted inflation, sources said. The council will draw up an interim report on social security and other reform measures, including the consumption tax cut, within this month, and Takaichi will then make a final decision. Government officials hope that related legislation will be submitted for enactment at an expected extraordinary Diet session in autumn. At Wednesday’s meeting, industry ministry staff said that a survey with major system vendors showed that respondents expect to complete necessary preparations, including updates to cash register systems, within up to five to six months for a tax cut to 1 pct. The zero pct option would require up to 10 months to a full year because system programs need to be drastically rebuilt. The outcome of an additional survey with retail industry groups and regional supermarket operators was also reported. According to the report, respondents said they would be able to finish their preparations within about a half year from the announcement of details of the tax cut if the 1 pct rate is adopted. Among opposition forces, Team Mirai rejects the proposed consumption tax cut, and the Democratic Party for the People has recently switched to a cautious stance. “We’ll make efforts so that we can form a consensus among participating parties,” LDP tax panel leader Itsunori Onodera, who chairs the working-level group, told reporters after Wednesday’s meeting. Also on the day, the working-level officials discussed the design of a proposed refundable tax credit system with cash benefits. In the previous working-level meeting, a rough proposal was presented to increase take-home pay for low- and middle-income workers by focusing on benefits alone for now and adjusting the amount in accordance with the income. END [Copyright The Jiji Press, Ltd.]