JAKARTA - Japan's plan to cut the consumption tax on food and beverages from 8 percent to 1 percent is now in the hands of Prime Minister Sanae Takaichi. Government and opposition negotiations ended without an agreement after months of talks.
Kyodo News, quoted Wednesday, July 29, reported that Takaichi is expected to ask the Liberal Democratic Party or LDP to continue the plan on Thursday. The 1 percent tariff is designed to apply for two years starting in April 2027.
The government coalition will then seek cabinet approval early next month. The policy is aimed at reducing inflationary pressure on household spending.
Consumption tax is collected when people buy goods or services. For food and beverages, Japan currently charges an 8 percent rate.
The summary of the discussion was presented at a cross-party national council meeting on taxation and social security on Wednesday. The report also contains a number of proposals from the opposition party.
One of them is cash assistance, which is considered to be more quickly distributed than tax cuts. Some opposition parties also propose permanent tax cuts amid prolonged inflation.
"As the government and the ruling party, we will immediately consider our policies," Takaichi said at the meeting.
Takaichi is known to be more open to government spending and tax cuts. At the same time, support levels for his cabinet have declined in a number of media polls.
He promised to immediately submit a related bill to parliament after the council delivered its views. Takaichi hopes that people will feel the reduction in tax burden as soon as possible.
The plan originated from the LDP campaign promise and its coalition partner, the Japan Innovation Party. In the February election for members of the House of Representatives, both promised a zero percent food tax rate for two years.
However, the government then considered a 1 percent tariff. The reason is practical. It is estimated that the cash register machine system in many stores only takes about six months to adjust. The implementation of a zero percent tariff takes several months longer.
To fulfill the zero-percent tariff campaign promise, the coalition also proposes cash assistance for low- to middle-income households. The value reaches 600 billion yen or about 3.7 billion US dollars per year.
The amount is equivalent to the estimated state revenue from the 1 percent food tax.
Since March, the council has held more than 20 rounds of discussions at the working level. However, not all opposition groups were invited to participate in the negotiations.
The government coalition called the two-year tax cut a transitional measure. The policy will apply until the income-based assistance program for low-wage workers is implemented in the 2029 fiscal year.
The program was previously approved by the council. After more than 20 rounds of discussions failed to produce an agreement, the direction of the food tax policy is now determined by Takaichi.
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