Japan May Delay Sales Tax Hike

November 18, 2014 Taxation in Japan

Sales Tax in JapanTOKYO – Japan’s economy has taken a sudden plunge, casting some doubt on weather the government will proceed with the hike to sales tax planned for next year.

According to new information made available by the government of Japan on November 17th, the economy of Japan has slid into a recession, and now some economists pinning the blame on the increase to the rate of the country’s sales tax from 5 percent to 8 percent in April this year.

Over the third quarter of this year Japan was expected to see a 2.1 percent rise in the national GDP, and a 0.8 percent rise in consumer consumption, however, in reality, the GDP actually shrank by 1.6 percent and private consumption only rose by 0.4 percent.

The disappointing economic performance in the third quarter follows a sudden decline in economic activity in the second quarter.
Almost immediately after the release of the information, some economists came forward to suggest that the root cause behind the disappointing economic performance was the hike to the rate of sales taxes, which slowed consumption, decreased economic activity, and introduced market distortions, as consumers opted to spend more prior to the enactment of the hike.

It was also suggested that the new information may be enough reason to drop, or at least delay, the planned hike of the rate of sales tax from 8 percent to 10 percent in October 2015.