Japanese MoF Tax-Inclusive Pricing Plan Unpopular With Retailers

by Mary Swire, Tax-News.com, Hong Kong

08 August 2003

From April next year, the Japanese Ministry of Finance intends to introduce a tax-inclusive pricing system on all goods and services purchased in the country, much to the chagrin of the retail industry and consumers.

This will mean that the 5% consumption tax will automatically be incorporated into the price of goods and services, replacing the current system of tax-exclusive pricing. Whilst the government has stated that the new system will make life simpler for consumers, businesses and consumer groups doubt that this is the Finance Ministry's prime motive.

"We suspect the ministry wants to conceal the consumption tax so it won't be obvious when they raise the tax rate in the future," one consumer group representative told Japanese daily, the Asahi Shimbun.

For the country's retailers however, there are likely to be massive cost implications associated with implementing the new system, and it has been estimated by supermarket chains that the conversion of cash registers to the tax-inclusive system will cost in the region of 10 billion yen ($83.7 million).

According to the Japanese newspaper, a recent experiment by one supermarket in which prices were displayed in both the inclusive form and the before tax form was found to be very unpopular amongst shoppers.

Another issue that retailers are taking up with the Finance Ministry is the issue of dealing in fractions of less than one yen. At present, when calculating consumption tax, fractions are generally rounded down. Naturally, this deprives the government of some revenue, and the ministry is planning to phase out this practice in favour of rounding up fractions. This move has been opposed by business groups, however, who argue that the extra burden will be passed on to consumers.

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