TOKYO: A ruling camp panel on tax reform had its first meeting in two months on Friday, starting full-fledged discussions on reduced consumption tax rates for essential daily foodstuffs.
Talks will focus on exempting three categories of items from the planned hike in the consumption tax rate to 10 percent. However, the Liberal Democratic Party and its coalition partner Komeito are expected to argue over such details as when the reduced tax rate system should be introduced.
The three options for categories are “food and beverages excluding alcoholic beverages,” “perishable foods” and “polished rice.”
In June last year the panel presented eight options for items to be covered by the system, but details such as exactly which products could be defined as food and beverages were vague. It narrowed the options down to three by clearing defining categories and items that could be subject to reduced rates in accordance with the food labeling law and other relevant laws.
The Finance Ministry’s estimates for scenarios in which reduced rates are applied to the three options were submitted at Friday’s meeting. If reduced rates were applied to food and beverages excluding alcoholic beverages, for example, tax revenue was estimated to drop by about ¥660 billion annually for each percentage point of the consumption tax.
The estimates saw a drop of ¥170 billion if perishable foods were covered by the system, and a fall of ¥20 billion if polished rice was covered. If the reduced tax rate system results in a huge decrease in tax revenue, alternative sources of revenue will be needed.
The panel plans to have full-fledged discussions on such issues as how to secure substitute revenue and the potential impact on household budgets. It aims to compile a draft plan for the system by autumn.
The LDP and Komeito have already agreed to aim to introduce reduced tax rates for daily necessities from fiscal 2017.
