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Editorial: Fully prepare for consumption tax rate hike in final month remaining

  • September 1, 2019
  • , The Japan News , 7:48 p.m.
  • English Press

Are measures to offset the negative impact of the consumption tax rate hike fully prepared? It is hoped that the preparation period will proceed smoothly by carrying forward the final review on the measures.


Only a month remains before the consumption tax rate is raised to 10 percent. When the tax rate was set to be increased from 5 percent to 8 percent in April 2014, the last-minute spike in demand had the repercussion of consumer spending plunging drastically after the rate hike.


Taking this as a lesson, economic measures worth more than ¥2 trillion, such as public works investments, reduced taxes and a reward points program, will be implemented this time.


Consumers and retailers must be thoroughly informed of the contents of such measures to prevent the economy from buckling.


Expensive homes and cars are vulnerable to the impact of the tax rate hike. As for housing, the period of the housing loan tax reduction will be extended from 10 years to 13 years, provided that people move in by the end of 2020. The number of people eligible for the homeowner subsidies program will be expanded, while the amount of the payment in the program will be increased.


If a new car is purchased after the consumption tax rate hike, reductions in the range of ¥1,000 to ¥4,500 to the annual automobile tax will be given.


The announcement of such measures has perhaps been effective. So far, there has been no noticeable sign of last-minute purchases. It is hoped that efforts to make these systems more widespread will be made.


With the upcoming consumption tax rate hike, a reduced tax rate system will be introduced. Under the system, the tax rate for some food and beverages and newspaper subscriptions will remain at 8 percent. It is expected to help mitigate the pain to be felt by consumers as a result of the tax rate hike.


Pay attention to hardships


However, there are concerns over delays in the preparations for the tax rate hike at retailers. Subsidies are provided for the costs to replace and modify cash registers, but only about 40 percent of about 300,000 business operators assumed to be eligible for the subsidies applied for them as of the end of July.


The Small and Medium Enterprise Agency initially set a requirement for the subsidies that modifications on and replacement of registers must be completed by the end of September.


However, it changed the condition, allowing business operators to receive the subsidies as long as they already signed contracts to modify or replace their registers. It is necessary to carefully explain this to operators so that preparations can be promoted.


The reward points program will cover cashless payments at small and midsize stores. The rebate rate will be 5 percent at small and midsize stores and 2 percent at stores owned by major chains such as convenience stores.


As of Aug. 29, about 510,000 small and midsize stores applied to join the program, accounting for only a quarter of the about 2 million eligible stores in total. There are probably still many small and midsize stores that are reluctant to deal with the costs and time necessary to shift to accepting credit cards among other transactions.


The measures are an unprecedented attempt to pursue the twin goals of propping up consumer spending and promoting cashless transactions. Consumers and small and midsize businesses unfamiliar with cashless transactions may complain. Paying careful attention to such people must not be forgotten.


There is a possibility that discount sales will spread at major supermarkets and other stores that are not eligible for the reward points system. Authorities concerned should closely monitor whether such a situation may put a burden on subcontractors as a result of discounts.


(From The Yomiuri Shimbun, Sept. 1, 2019)

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