General foods, including fresh and processed foods, will be subject to the reduced tax rate.
The ruling Liberal Democratic Party and its junior coalition partner Komeito have agreed to make general foods, with the exception of eating out and alcoholic beverages, subject to a reduced tax rate that will be introduced when the consumption tax rate is raised to 10 percent in April 2017.
Resources of more than ¥1 trillion will be needed to compensate for the tax revenue loss that will result from the agreed-upon reduced tax rate system. The LDP nevertheless accepted Komeito’s requests completely, with an eye on the House of Councillors election scheduled for summer next year.
Liberal Democratic Party Secretary General Sadakazu Tanigaki and his Komeito counterpart Yoshihisa Inoue met together with the heads of their parties’ tax commissions on Saturday afternoon to reach a final agreement on what items should be subject to the 8 percent reduced tax rate.
After the meeting, Tanigaki told the press that general foods, including fresh and processed foods, will be subject to the reduced tax rate.
The reduced tax rate system is considered a measure to ease the burden placed on the general public by the consumption tax hike, particularly low-income earners, and boost personal consumption by keeping the tax rate on daily necessities low.
Regarding the tax revenue loss, ¥400 billion will be covered by cancelling a system that was going to set a limit on individual payments for medical and nursing care fees. A handful of other measures have also been proposed to cover the remaining more than ¥600 billion, including a tobacco tax hike, but sources said none of them have been considered feasible yet.
Source: Yomiuri
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