Japan approves bill to cut food and beverage tax to 1% starting fiscal 2027
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Japan's cabinet today approved a draft bill to temporarily cut the consumption tax on food and beverages, alongside measures to provide income-based cash handouts. The consumption tax rate on food and beverages would drop from 8% to 1% for two years, starting in fiscal 2027, or April next year, together with annual cash assistance for low- and middle-income earners. The government aims to submit the bill to parliament during the current extraordinary session and push for approval by December 12, the final day of the session. The measures are expected to cost a total of about 10 trillion yen, or roughly 63 billion dollars, over the two-year period, raising concerns about Japan's fiscal position, which is among the weakest of the developed economies. Meanwhile, opposition lawmakers have questioned the funding source and criticized the criteria for determining who qualifies for the handouts as unclear. If enacted, this tax cut would be Japan's first reduction of the consumption tax rate since the tax was introduced in 1989. Japan's standard consumption tax rate has stood at 10% since October 2019, while food and beverages are subject to a reduced rate of 8%, excluding alcoholic drinks and dining out.