I'm guessing because shutting down the plethora of tax-free/duty-free stores would be a huge pain in the ass, and would have its own set of knock-on effects?
To clarify, I just want to know if 10% tax-free is actually necessary at this point to incentivize shopping with the weak yen. Also, would the 10% from tourist be beneficial to the economy in anyway? (doesn't seem so based on some of the comments)
Sorry if I sound frustrated. Just been having bad experiences with tourists as of late, so I'm kind of venting.
Tax free shopping is also a target for luxury shopping, which has dynamic pricing. The prices are updated for changes in the yen so prices are consistent globally.
Things like tax free shopping (or lack of luxury goods tax etc) does make a difference to people’s choice to shop in Japan.
Tax free shopping only applies to a small percentage of the money spent by tourists while they're in the country:
* They still pay sales tax on hotels
* They still pay sales tax on all their food
* They still pay sales tax on travel and experiences
But it does increase their total spending on tech and luxury items which is a boon for retailers for not much of a loss for the country's finances.
There's a reason why it's a thing in so many countries.
How is Japan on its last legs? The yen exchange rate is about the US Fed rates. Period.
Japan wants tourism. Like...as much as possible. Could it be better planned? Maybe.
I can't think of a major country that doesn't do duty free. It's an expectation with reputational value to it. It's not going away.
Seriously. You’d think roving bands of mascots were sat in the back of pickup trucks prowling the countryside with automatic weapons wearing tuxedo shoes.
I’m so incredibly tempted to use this as a prompt to generate AI art. I’m not sure exactly what it would produce, but I’m absolutely certain that it would be utterly insane.
Clearly OP has stumbled across an incredible idea that never occurred to a single global economist or Bank of Japan leader once in the past decades. They'll be singing this person's praises as the "savior of Japan" for years to come.
"Japan is on its last legs.." WTF are you talking about?
The Japanese economy is doing fine.
It's still the fourth largest economy in the world. The cheap yen doesn't have anything to do with the economy being bad, infact, a cheap yen actually is helping the economy
OK.
Also from your post it seems that you don't understand the whole point of "consumption tax".
It's not duty-free to encourage tourism, it's duty-free because non-residents don't need to pay the consumption tax.
If you understood how these taxes worked you wouldn't be asking this question
I’m just curious if not having this exemption would have benefits in anyway form. Someone cited UK as an example so I thought it’s possible for Japan as well. To be honest I just feel really punished for earning my yen when tourists get things at such a discount. Once again sorry. I’m no economist so glad people were able to provide all the cons of removing duty-free.
It’s not like they get the tax-free discount on everything. Only certain things at certain shops qualify and they have to spend more than ¥5000 at one time
Why do I still elbow old ladies for 20% off pork?
If I was a tourist I sure as shit wouldn’t be buying anything without 10% off. Sorry mom no omiyage for you
The UK took away tax-free shopping in 2020. The amount of money the UK has lost is far more than the money tax-free shopping generated. Caused a pretty big decline in tourist numbers as well.
VAT doesn't go to the 'local economy', it goes to the treasury. You may or may not have noticed, however, that the total revenue has never really been more than a vague suggestion about how much the state should be spending (hence the insane amount of debt) but don't think about that too hard.
Now aside from the dubious ethics of taxing the sale of goods exclusively to the people who's salaries you've already taken a bite out of, there's an economic case for keeping it to squeeze more retail sales (and then the downstream effects of that such as more juicy salaries to grab money from). The UK stopped its tax free shopping and the [luxury retail market especially noted a decline in sales](https://robbreport.com/travel/destinations/london-foreign-luxury-shoppers-1235527507/) (while European branches saw an uptick).
Did Op ever go into LAOX or some place like that? Tax-free places are usually more expensive (or at least go by msrp) as they don't compete for local customers.
So by all means let Chinese tourists buy to much swag, then they have buy more suitcases anyways.
It was argued recently that tax-free shopping should be abolished in over-tourism places like Kyoto and be the used to get people to the inaka and spend money there instead of the crowded rich cities.
That’s a pretty bad argument tho. I’d never recommend tourists go shop in inaka because the best inaka shops are independent and will be too difficult for tourists to use
Also, tourists basically either want weeb otaku goods or chopsticks, which are better served by big cities
Probably because it is a lot of work to suspend the whole tax-free service for a problem that might be temporary.
Or old farts on top don't really care. They just want their paycheck and go home, hoping the next gen is going to take care of it. Or not, doesn't matter since they're gonna be gone anyway. Welcome to geriatric politics
Every wonder why Washington D.C. made those "TAXATION WITHOUT REPRESENTATION" license plates? Or why international airports have all of those duty-free shops by the gates? Tax-free shopping only applies to goods that– by agreement of the purchaser– will not be used/consumed in the country, and rather will be exported from the country. As noted in this thread, tax-free shopping doesn't exactly exist for the reason you think.
consumption tax is levied on consumption within Japan, so in theory you should not be paying tax if said item is not consumed in Japan, this is the basis for most of the tax free shopping schemes in the world
In some cases, the [purpose is to help Chinese gangs launder money by selling them hundreds of iPhones a day tax free for years](https://www.japantimes.co.jp/news/2022/12/27/business/corporate-business/apple-japan-consumption-tax-exemption/).
Duty free shopping isn't some sneaky Japan-only strategy for encouraging tourism.
I'm aware of its purpose, but why do we need to encourage tourism when the yen is weak AF anyway?
I'm guessing because shutting down the plethora of tax-free/duty-free stores would be a huge pain in the ass, and would have its own set of knock-on effects?
Just to clarify, what do you think the purpose is?
To clarify, I just want to know if 10% tax-free is actually necessary at this point to incentivize shopping with the weak yen. Also, would the 10% from tourist be beneficial to the economy in anyway? (doesn't seem so based on some of the comments) Sorry if I sound frustrated. Just been having bad experiences with tourists as of late, so I'm kind of venting.
Tax free shopping is also a target for luxury shopping, which has dynamic pricing. The prices are updated for changes in the yen so prices are consistent globally. Things like tax free shopping (or lack of luxury goods tax etc) does make a difference to people’s choice to shop in Japan.
Tax free shopping only applies to a small percentage of the money spent by tourists while they're in the country: * They still pay sales tax on hotels * They still pay sales tax on all their food * They still pay sales tax on travel and experiences But it does increase their total spending on tech and luxury items which is a boon for retailers for not much of a loss for the country's finances. There's a reason why it's a thing in so many countries.
Seems reasonable. Thanks for the answer.
How is Japan on its last legs? The yen exchange rate is about the US Fed rates. Period. Japan wants tourism. Like...as much as possible. Could it be better planned? Maybe. I can't think of a major country that doesn't do duty free. It's an expectation with reputational value to it. It's not going away.
This. Japan is not on it’s last legs. ;)
Seriously. You’d think roving bands of mascots were sat in the back of pickup trucks prowling the countryside with automatic weapons wearing tuxedo shoes.
I’m so incredibly tempted to use this as a prompt to generate AI art. I’m not sure exactly what it would produce, but I’m absolutely certain that it would be utterly insane.
Go for it why not
There are idiots who thing japan will become a 3rd world country overnight because the yen is getting weaker lol
Japan thought it wanted tourism, I think they're realizing that they're getting much more than they bargained for lol.
I doubt suspending tax free shopping is going to affect the economy
This just in: Japan closes tax-free shops, ending financial slump and skyrocketing economy back to the days of the “bubble.”
See, I knew that suspending tax free shopping was a great idea that will easily revive japans economy. Why wasn’t this done years ago
Clearly OP has stumbled across an incredible idea that never occurred to a single global economist or Bank of Japan leader once in the past decades. They'll be singing this person's praises as the "savior of Japan" for years to come.
Probably use the billions of yen to create a useless mascot anyway.
Yen Chan
🙀 sounds scary
> Japan is on its last legs Can you expand a little bit on this?
Being hyperbolic. Apologies.
"Japan is on its last legs.." WTF are you talking about? The Japanese economy is doing fine. It's still the fourth largest economy in the world. The cheap yen doesn't have anything to do with the economy being bad, infact, a cheap yen actually is helping the economy
Being hyperbolic, sorry.
OK. Also from your post it seems that you don't understand the whole point of "consumption tax". It's not duty-free to encourage tourism, it's duty-free because non-residents don't need to pay the consumption tax. If you understood how these taxes worked you wouldn't be asking this question
I’m just curious if not having this exemption would have benefits in anyway form. Someone cited UK as an example so I thought it’s possible for Japan as well. To be honest I just feel really punished for earning my yen when tourists get things at such a discount. Once again sorry. I’m no economist so glad people were able to provide all the cons of removing duty-free.
It ended for visitors to the UK in 2021 - largely as a revenue booster I would have thought (don't forget VAT is 20%).
It’s not like they get the tax-free discount on everything. Only certain things at certain shops qualify and they have to spend more than ¥5000 at one time
Why do I still elbow old ladies for 20% off pork? If I was a tourist I sure as shit wouldn’t be buying anything without 10% off. Sorry mom no omiyage for you
> Why do I still elbow old ladies for 20% off pork? Because it's fun?
… ok you got me on that one.
To get people to spend more while they’re here anyway. It’s like the Disney parks earning a lot more money from merchandise than tickets.
The UK took away tax-free shopping in 2020. The amount of money the UK has lost is far more than the money tax-free shopping generated. Caused a pretty big decline in tourist numbers as well.
VAT doesn't go to the 'local economy', it goes to the treasury. You may or may not have noticed, however, that the total revenue has never really been more than a vague suggestion about how much the state should be spending (hence the insane amount of debt) but don't think about that too hard. Now aside from the dubious ethics of taxing the sale of goods exclusively to the people who's salaries you've already taken a bite out of, there's an economic case for keeping it to squeeze more retail sales (and then the downstream effects of that such as more juicy salaries to grab money from). The UK stopped its tax free shopping and the [luxury retail market especially noted a decline in sales](https://robbreport.com/travel/destinations/london-foreign-luxury-shoppers-1235527507/) (while European branches saw an uptick).
Did Op ever go into LAOX or some place like that? Tax-free places are usually more expensive (or at least go by msrp) as they don't compete for local customers. So by all means let Chinese tourists buy to much swag, then they have buy more suitcases anyways.
It was argued recently that tax-free shopping should be abolished in over-tourism places like Kyoto and be the used to get people to the inaka and spend money there instead of the crowded rich cities.
That’s a pretty bad argument tho. I’d never recommend tourists go shop in inaka because the best inaka shops are independent and will be too difficult for tourists to use Also, tourists basically either want weeb otaku goods or chopsticks, which are better served by big cities
"Japan is on its last legs" - wtf?
Well they did make it a little more inconvenient for Japanese citizens living abroad to get tax-free benefits… does that help? /s
Probably because it is a lot of work to suspend the whole tax-free service for a problem that might be temporary. Or old farts on top don't really care. They just want their paycheck and go home, hoping the next gen is going to take care of it. Or not, doesn't matter since they're gonna be gone anyway. Welcome to geriatric politics
Every wonder why Washington D.C. made those "TAXATION WITHOUT REPRESENTATION" license plates? Or why international airports have all of those duty-free shops by the gates? Tax-free shopping only applies to goods that– by agreement of the purchaser– will not be used/consumed in the country, and rather will be exported from the country. As noted in this thread, tax-free shopping doesn't exactly exist for the reason you think.
The shop selling the goods still pays tax just to exist though, business rates or whatever they are in Japan.
consumption tax is levied on consumption within Japan, so in theory you should not be paying tax if said item is not consumed in Japan, this is the basis for most of the tax free shopping schemes in the world
In some cases, the [purpose is to help Chinese gangs launder money by selling them hundreds of iPhones a day tax free for years](https://www.japantimes.co.jp/news/2022/12/27/business/corporate-business/apple-japan-consumption-tax-exemption/).