Now that it is a month till increase of consumption tax (消費税) that news in Japan is filled with topics of consumption tax, pretty much cannot avoid it if you read or watch news these days. Sure, I am learning a lot about Japanese consumption tax… I do not know if it is good thing or not…

When Japanese consumption tax increased from 3% to 5% in 1997 GDP (gross domestic product) of Japan three months prior to the increase of consumption tax increased by 3.1% compare to previous year. Where GDP of Japan three months after the increase of consumption tax decreased by 3.9% compare to previous year. Japanese government is expecting similar situation when consumption tax will increase from 5% to 8% this April 1. Where on October 1 next year consumption tax will increase from 8% to 10% and some are predicting more people are purchasing high end items prior to April 1 this time around compare with consumption tax increase of 17 years ago. Where some are indicating larger effect on GDP of Japan this time around due to another increase of consumption tax taking place next year.

Matsuzakaya department store has extended store hours by one hour during month of March expecting increase demand of high end items such as jewelries. Mitsubishi Electric has seen increase of demand for house hold air condition units (looks as people are not waiting till summer but buying before April 1) that the production is now open seven days a week, production workers are cashing in overtime pay on Saturdays and Sundays. Mitsubishi Electric is expecting the demand will die down in April and expecting production will go back to normal 5 days/week schedule.

The law concerning consumption tax indicates that tax is due based on when the service was rendered, not when the payment was made. For example, if purchasing a new car and made the payment before April 1. But if actual delivery of the car is after April 1 then 8% consumption tax have to be collected. So sounds like what Gold’s Gym said is correct as far as consumption tax law is concerned. If using gym facility in month of April, then it is considered service is rendered during April so 8% consumption tax will apply even though if membership fee was paid prior to April 1.

However, each business is handling situation differently. Businesses which are open 24 hrs. such as convenience stores and family restaurants have their register set to change from 5% consumption tax to 8% consumption tax at 12 midnight on evening of March 31. Family restaurant chain Skylark is saying at right around 11:59 p.m. March 31 they will ask customers in a restaurant to pay the bill which will be handled with 5% consumption tax and any further orders placed after 12 midnight will be charged 8%.

Izakaya chain restaurant which is not open 24 hrs. said that on the evening of March 31 they will keep 5% consumption tax till closing including orders after 12 midnight. JR is increasing fares on April 1 due to increase of consumption tax. However, if buying Shinkansen ticket for April 5 trip today, fare will be based on today’s fare, not the new fare set on April 1. Under situation like that what happens to 8% consumption tax based on when service was rendered, not when the payment was made? Situation like this with this Izakaya restaurants and JR, the business will be flipping 3% difference in consumption tax out of their own pocket.

Those are business decision made individually. So Gold’s Gym could made a business decision to shell out 3% difference in consumption tax out of their pocket for members who paid membership fee prior to April 1. However, as far as law concerning consumption tax is concerned, Gold’s Gym is not doing anything against the law.

I am learning so much about Japanese consumption tax by reading and watching news lately…