Japan Press Weekly

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2015 April 1 - 7 [ECONOMY]

Small business owners scream with consumption tax pain

One year has passed since the consumption tax rate went up to 8% from the previous 5% in April last year. The pain of the 8% tax rate has been too much for many small business owners.

A 77-year-old man who owns a family-run factory in Tokyo producing rubber mechanical parts said, “I’ve operated my business for 47 years. The situation is the worst I’ve experienced. After the consumption tax rate was raised to 8%, the number of orders we received dropped by 20% although it had already been in decline. We are actually living on our pension benefits.” He went on to say, “We paid 670,000 yen in consumption tax payments last year, 1.6 times more than a year earlier. We can’t go on any longer.”

A 68-year-old vegetable shop owner in Tokyo said that the amount he paid in consumption tax was 189,500 yen in 2013 but it increased by 1.6 times to 312,540 yen in 2014. “Because my store underwent a 10% decrease in annual sales…, I’m really stuck,” he exclaimed. Explaining that the number of customers visiting his store dropped by 25% after the tax hike, he said, “The higher consumption tax rate has had a big impact on my business. Everyone now holds their purse strings tightly.”

The Tokyo federation of the Democratic Commerce and Industry Organizations (Minsho) conducted a questionnaire survey of small business owners last summer. According to the survey, the percentage of those who answered that they “cannot shift the additional burden of the consumption tax onto the sales price” was 40%. The response that consumption tax rate increase “caused a decrease in sales” amounted to 55.8% of respondents. The survey also shows that 54.3% consider that their business outlook in 2015 is “bad”.

Open comments include, “We pay the consumption tax to stock our businesses but we don’t receive that consumption tax from customers” (rice dealer) and “I can’t sleep well for worrying about the falling sales and various payments I have to make” (Chinese restaurant owner).

Minister of Economy Miyazawa Yoichi admitted that “a considerable number of business owners are unable to shift the consumption tax increase onto sales prices” (reply to Japanese Communist Party Shimizu Tadashi, House of Representatives Budget Committee, March 12).