There are six months to go before the 10-percent consumption tax rate hike scheduled on Oct. 1.
Amid concern that retailers are under-prepared for the reduced tax rate system to be introduced at the same time as the consumption tax increase, the number of telephone inquiries about the subsidy program for upgrading store cash registers has surged since the beginning of this year.
The government is accelerating preparations for the implementation of economic measures to prevent the tax hike causing an economic downturn, including a points reward program for cashless purchases.
The reduced tax rate scheme, under which the consumption tax rate of daily necessities will be maintained at the current 8 percent, covers such things as food and beverages, excluding at restaurants, alcoholic drinks and subscriptions for newspapers issued twice or more a week. For the transition to the multiple tax rate system, it is necessary for retailers and others to upgrade store cash registers.
According to the Small and Medium Enterprise Agency, about 95,000 applications have been filed for the subsidy program for cash register upgrading by the end of February. It is only about 30 percent of the estimated 300,000 applications. However, since the beginning of this year, the number of inquiries to the telephone consultation counter has rapidly increased to about 7,000 in January and about 8,000 in February from last year's monthly average of about 3,000.
Economic measures focus on preventing a decline in consumption. The centerpiece of the measures is the points reward program, which will refund consumers part of their spending in the form of reward points that can be used in future shopping when using cashless payments, limited for nine months from October to June 2020. Consumers will be able to get a 5 percent refund at middle- and small-sized retail stores and restaurants and 2 percent at major chain stores such as convenience stores.
The consumption tax was implemented 30 years ago, on April 1 in 1989, at the rate of 3 percent. The tax rate was raised to 5 percent in April 1997 and to 8 percent in April 2014. While the 10 percent tax rate hike was scheduled in October 2015, Prime Minister Shinzo Abe postponed it twice, citing the economic downturn as the reason.
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