Japan postpones VAT increase for second time

On Wednesday June 1st PM Abe announced that he would again delay the increase in consumption tax. The increase of the VAT rate to 10% was scheduled for April 2017.  The hike has been delayed for anouther two-and-a-half years until October 2019.  Abe stated that the hike at this point in time would "create a risk of the country falling back into deflation" hurting the chances that the Japanese economy would regain a sustainable growth track. 

Japan was expected to introduce a 10% VAT-rate for non-food stuffs from April 2017 and keep an 8% VAT-rate for essential foodstuffs. During the past years, most of the discussions had focuses on what items would fall under the lower rate and how SMEs in particular would have to deal with the administrative burden of the diversified VAT-rates. It now looks that these measures will be postponed and uncertainty with regard to the VAT rates will continue for the coming years for both consumers and businesses.

 

Source: Nikkei Asian Review, "Japan PM Abe announces tax-hike delay", June 1, 2016

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