Japan is considering revising the consumption tax exemption system for visitors from abroad to prevent goods bought tax-free from being resold within the country.
The government and the Liberal Democratic Party-led ruling camp plan to change the tax-free system into one that will refund the tax after it is confirmed that visitors are actually taking their purchased items with them when they leave Japan.
Details of the new system, including when to start it, are expected to be included in the annual tax system reform package for fiscal 2025, which will be adopted near the end of this year.
Consumption tax is imposed on goods and services used domestically. Items that visitors take out of Japan are exempt from the tax, while those for domestic consumption or resale are not.
Japan’s system is unique in that it allows purchases at prices excluding consumption tax. Visitors can have the tax deducted at duty-free shops by presenting identification such as passports. Japanese customs check whether they are actually taking home what they bought by examining purchase records provided by duty-free stores.
But many visitors skip customs inspections. In investigations of 57 visitors who each bought tax-free goods worth at least ¥100 million in fiscal 2022, only one was found to be taking the purchased items out of Japan. Fifty five of the remaining 56 visitors, all obligated to pay consumption tax, departed without doing so. The unpaid tax totaled ¥1.85 billion.
The government and the ruling camp aim to change the tax-free shopping system into one in which visitors buy products at prices including consumption tax and have the tax refunded after what they take home are checked against their purchase records at customs.
They are considering having the tax refunded in cashless form, such as via credit card or electronic money.