Ruling parties agree to apply reduced tax rate to processed food products
(Mainichi Japan)
The ruling Liberal Democratic Party (LDP) and Komeito agreed on Dec. 9 to include processed food products along with fresh foods under a reduced tax rate system to be implemented together with the consumption tax hike to 10 percent in April 2017.
The decision was a large concession by the LDP, which had been arguing to limit the reduced tax rate to fresh foods but wanted the cooperation of Komeito in the House of Councillors election next summer. Consumption tax revenue will be cut by about 1 trillion yen a year compared to if no reduced tax rate was applied.
Under the agreement, fresh foods such as rice and meats, processed foods such as bread, noodles, snack foods and non-alcoholic drinks will be kept at a consumption tax rate of 8 percent while the rate for other products is raised to 10 percent. Alcoholic drinks and food served at restaurants will not receive a reduced rate. The government will propose a bill to revise the consumption tax hike law at the ordinary Diet session convening in January, aiming to pass it at the same time as the draft budget for fiscal 2016.
Near the end of discussions with Komeito, the LDP had suggested leaving out snack foods and drinks, which would limit the yearly tax loss to 820 billion yen. However, due to the difficulty of categorizing between product types like "breads" and "snacks," and out of concern about causing confusion in the lives of citizens, in the end the plan that included snack foods and drinks was settled upon.
In discussions on Dec. 9, LDP Secretary-General Sadakazu Tanigaki met with Prime Minister Shinzo Abe and Chief Cabinet Secretary Yoshihide Suga, and the party changed its position to support allowing processed foods and drinks under the reduced tax rate system.
Following their agreement on the scope of the reduced tax rate, the ruling parties were set to agree as early as Dec. 10 on an outline for tax reform for fiscal 2016.
The tax loss is estimated to reach 1 trillion yen a year. Although 400 billion yen is estimated as recoverable through other reforms, concerns remain over how to make up the remaining 600 billion yen.
