There’s a New Tax in Town

Version 2

By Akilah Bel

Abraham Lincoln once stated, “In this world nothing can be said to be certain, except death and taxes”. Centuries later Celine Dion sings “Rain, tax (It’s inevitable)”.  The common thread, then and now, is that taxes cannot be avoided, and with the world in its current messy economical climate, countries are increasing taxes as a means of producing much needed economic stability.

As a result, as the cherry blossoms began to bloom and the warmer, milder breezes of spring began to flow across the Land of the Rising Sun, a new sun also began its ascent- the rise of consumption tax from 5% to 8%.  But in what way does this tax increase affect us as JETs?  In order to understand its effect, understanding why and how this increase occurred is also vital.

To do this, let’s take a journey back to the summer of 2012.  Cicadas were chirping, the heat was sweltering and parliament was meeting to pass a bill stating that if the economy grew by 3% in nominal terms and 2% in real terms, the tax would be increased from 5% to 8% in April 2014, with an addendum to increase it to 10% in October 2015.  I don’t know about you, but economics was not my strongest subject in school.  So what does this all mean?  Basically, if the Japanese economy was able to make a profit of around 2% they would increase the tax.  But why increase the tax in the first place?  Well, there are two reasons…

First and most importantly, Japan has one of the highest (if not the highest) debt to Gross Domestic Product (GDP) ratios in the developed world.  It currently sits at 2:1.  Having a debt pile that high can and will have serious repercussions in the future if steps are not taken to rectify it. Coming from a developing country, I know all too well about the threat of currency devaluation and the way in which that step so often used by the International Monetary Fund (IMF) to “rectify” GDP vs. debt problems can effectively ruin a country for decades.  As a result, part of “Abenomics”- a term coined to refer to the many reforms Prime Minister Shinzo Abe is implementing to boost the economy- included increasing the consumption tax to help fill Japan’s coin coffers and hopefully rectify the imbalance.

http://www.thetimes.co.uk/tto/news/world/asia/article3640820.ece

A secondary reason, and one that I personally appreciate, is to create better economic support for the Japanese health care system.  Since health insurance in Japan covers the bulk of medical costs, having more funds to support the ever rising costs of health care is never a bad thing.  I recall upon arrival in Japan last August that I was struck by a nasty cold, but I hadn’t received my health insurance card yet.  I went to the doctor and paid the full price for the medication which was around 8,000 yen.  Not cheap at all.  Luckily, when I got the insurance card about two weeks later, and returned to the doctor’s office with proof that I was indeed insured (coverage started upon arrival in Japan even without the card), I was reimbursed with a hefty 6,000 yen making  me an instant fan of Japan’s health care system.

Despite these proposed benefits that a tax increase would provide, ushering in a new tax will never be accepted or appreciated easily by the general public.  In the month preceding the increase, I noticed that several of the teachers on my staff were rushing to make purchases of large electrical items in preparation for the tax increase.  One bought a refrigerator, another was sure to get a new car.

Personally, while I understand why the increase had to occur, I have to admit that I find the new tax completely confusing.  Why? Due to the manner in which it is being applied to goods.  Before the tax increase, prices were listed on products with the tax included.  When I went to purchase something, I knew that the price I saw on the tag would be the price I paid at the till. but this is no longer the case.  Whether it be in the supermarket, at a restaurant, or online, the prices now all carry  a message in brackets beside them [tax not included].  With this increase of consumption tax, a change in the way items are priced has taken place as well.  I was a bit uncertain as to the reason why it was changed like this.  Was it to demonstrate the lower price of items before tax and reassure people that they were still buying things at reasonable prices before the tax is added?  This confusion disappeared slightly after reading one of those Facebook links, “20 of the Weirdest Things About America that Americans Don’t Find Weird.”  On that list of 20, they noted that in the US prices are always shown without the tax included.

Aeon Co. Employees Change Price Signs Ahead Of Sales Tax Hike

Having grown up and lived in countries where the price tag always included tax, I just accepted that that’s the way it is done globally.  Now it seems my American counterparts are perhaps feeling a little bit more at home with this change in the display price, while I feel like a fish completely out of water.  You can’t begin to imagine the insane amount of crazy thoughts that went through my mind, when I saw items suddenly cheaper, only to get to the checkout and have my bill come out exceedingly higher than I’d calculated.  I was extremely confused.  I tend to do mental calculations of purchases and know roughly how much I’m going to spend before I go to a cashier.  The first few weeks after the tax increase I was unable to do this and it was driving me batty.  I felt that I was losing some of the control I had finally gained in Japan.  Could it be possible that something as simple as a tax increase would send me spiraling back into that depressing Phase 2 of culture shock?

Fortunately, I was able to avoid the Phase 2 abyss by adding 1,000 yen to my final calculation price.  That way, I always tended to get a total more than I would actually pay at the check out, and it made me less irritated.  Also, I have really started to do bargain shopping.  If you look carefully, some shops have specials on, where they are trying to get rid of what I presume is excess stock, and have some items at even lower prices than their original pre-tax increase ones.  On the other hand, some items have gone up by 100 percent, which makes absolutely no sense, but I know that I am sure to avoid them.

So what’s my advice for dealing with the tax hike? Take a break and go outside and smell the flowers.  After all, spring has come and Japan has beautiful and diverse groups of flora and fauna to rock your senses.  After all, it’s not like we can change the increase in taxes, so we might as well try to accept it and enjoy the natural tax-free beauty of Japan.

2 thoughts on “There’s a New Tax in Town

  1. Nice article, Akilah! I’m a Toyama JET and they reposted this in our local AJET online magazine. Even though I’m American, and I did grow up with having list prices not include sales tax, I also found it jarring when stores began to change to this new system. In America, products are sold at the same price nationwide, but the sales tax varies from state to state, so it makes sense to exclude tax when listing the price on things, but here there’s no reason to do it that way. It’s strange. And economics is not my strongest subject either, so I appreciated the insight. I will only correct one very minor thing: the death and taxes quote was not said by Lincoln, but rather by Ben Franklin (also, I wouldn’t really say that Celine Dion came “centuries” after Lincoln) 😉

  2. Thank you for the comment Lawrence. Greatly appreciated. Also, cheers for the clarification on which American president said the death and taxes quote. 🙂 I knew the quote was centuries old, just mixed up the president. I am glad that seeing someone else with similar experiences helped. Thanks again.

Comments are closed.