Japan Consumption tax is 10% now

The consumption tax rate increased to 10% from 1st Oct 2019 as Japan tries to cover the cost of social security.

Consumption tax rate incensement is not fresh news. In 2012, the Japan government already had an agreement in the major parties that take two steps to achieve a 10% consumption tax rate incensement. They raised the consumption tax rate from 5% to 8% in 2014 as the first step. It takes another 5 years to prepare the 10% tax increment.

Before the tax increment, social security covers 3 payments including pension, medical care and nursing care, which mainly support the aging population. Now Japan government adds parenting support in the current social security system.

The expected increase in tax revenue from 8% to 10% in the consumption tax rate is about JPY 5.6 trillion/USD 52.3 billion.[1] Half of the income was planned to reduce the budget deficit. Japan has the worst debt balance in developed countries. It’s about 2.4 times its GDP. If Japan government doesn’t fix it, the debt will like a snowball that they even can’t pay the interest. JPY 1.7 trillion will be used for falling birthrate countermeasures.

Falling birthrate countermeasures including:

  • Free preschool education
  • Free college education
  • Free tuition fees for private high schools
  • Promotion of employment of the elderly
  • Etc.

Surely, it has some conditions for applying for these compensations. Almost all of them are suitable for only low-income families.

[1] https://www.jiji.com/jc/graphics?p=ve_pol_zeisei20181015j-02-w370
[2] https://www.mof.go.jp/consumption_tax/#finances

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