Seven things I didn’t know about the consumption tax

In the last few months I have been reading up a lot on Japanese tax law, and have come across the following interesting facts about the consumption tax:

1. The national consumption tax rate is only 4%. There is also a uniform local consumption tax defined as 25% of the national tax; the two taxes are added together to form the 5% figure that everyone pays. The local consumption tax is split evenly between the prefecture and municipality where the applicable good or service was sold.

2. Not all of that 5% goes to the government. Businesses always take the full 5% from their customers (so long as those customers are located in Japan) but only pass on a fraction of this amount to the government. They can deduct any consumption-taxable expenses—inventory, materials, machinery, fees and the like—from their consumption-taxable revenues, and pay 5% on this net amount. The idea is to charge a total of 5% tax on the final value absorbed by consumers regardless of how many middlemen were involved in getting a product/service to the consumer. Businesses generally tally up their consumption tax bills on a quarterly basis.

3. Small businesses get pretty sweet tax breaks. Businesses with annual sales of less than 50 million yen can choose to keep anywhere from 10% to 50% of the consumption taxes they charge, regardless of their actual deductible expenses. The permitted amount depends on the type of business: wholesalers keep the least while service businesses keep the most. This is a really good deal for small service businesses, since their biggest expense is usually personnel, and most personnel costs (salary, social insurance, etc.) are not subject to consumption tax. Businesses with annual sales of less than 10 million yen get an even better deal: they are completely exempt from paying consumption tax. So in quite a few cases, part of the 5% paid by the consumer is effectively absorbed by smaller suppliers and subcontractors in the value chain.

4. Consumption tax applies to imports into Japan, whether for personal or business purposes, though the rules for this are very complicated. If you are bringing valuables into Japan as an individual, the 5% tax is calculated against a “taxable value” on the item, which is usually 60% of the retail price paid overseas. This is technically separate from customs duty, but is charged as part of the same inspection process and is superseded by customs duty where customs duty applies (i.e. to alcohol, tobacco and single items valued at more than 100,000 yen). You don’t have to pay consumption tax on anything within your duty-free exemption. Here is an example of how the calculation works.

5. Consumption tax arguably creates a government subsidy for large exporters. This is because exports are not subject to consumption tax in Japan (though they may be subject to consumption tax in the importing country). So when a company like Toyota or Sony totals up their consumption taxes, they usually end up having more taxable expenditures than taxable sales, resulting in a consumption tax refund. Quite a few companies get hundreds of millions of yen a year refunded this way.

6. It’s possible for Japan residents to get a consumption tax exemption for items in excess of 10,000 yen which are to be taken overseas. This is different from the exemption for foreign tourists and comes with a bunch of qualifications, among them that the item must be a gift for someone else or to be used or consumed by the resident outside Japan, and that it must be sold at some kind of “export store” (輸出物品販売場). I might look into this further if I ever get around to buying a washlet for my parents’ house.

7. Consumption tax was introduced in 1989. Most Western European countries adopted some form of consumption tax in the early seventies, and the idea had been floated by the Japanese government as early as 1978, but nobody acted on it until the height of the bubble. The initial tax rate was 3%, all of which went to the central government. The coalition government in the early nineties proposed hiking the tax to 7% but almost immediately back-pedaled due to negative public reaction. The current 5% rate, including the local consumption tax, became effective in 1997 after the LDP returned to power.

What are your best “Japanese mistake” stories? I’ll start

In a couple weeks I am supposed to give a presentation (in Japanese) for my company’s family day. The topic is “common English mistakes by Japanese people.” I didn’t decide the theme, but I am hoping to use the opportunity to spread the message that speaking “wrong” English should be welcomed as long as you are at least communicating and using what you know.

And since I don’t think it’s fair to focus only on Japanese people’s English mistakes, to help make my point I am including the following anecdote about my own linguistic history:

About a month into my time as an exchange student in high school (my first-ever visit to Japan), I started staying with host parents who loved to feed me. Very, very nice and welcoming people. One time they served me hot cocoa, and I told them I liked it. Big mistake, because for the next two weeks they gave me the same hot cocoa with dinner every single night.

I was starting to get pretty sick of it, but I wanted to be polite and as such didn’t want to say no without doing so properly in Japanese. So I looked up how to say “I am getting tired of X” in the dictionary and went to my host mother and told her:

ココア、飽きたです (broken Japanese for, “I sick of cocoa”)

Her reaction? She looked shocked, started to cry, and asked why I would say such a thing. She then got her husband, and he demanded an explanation. I was starting to get nervous at this point, so I just repeated ココア、飽きたです thinking they’d get it this time. They didn’t and just seemed to get even angrier and more hurt…

Sweating now, I tried a few more times with different, untested sentence structures, mustering all my training from stateside Japanese classes. (ココアおいしいけど飽きたです?). With each utterance, they would look at me curiously and then start talking among themselves in words I couldn’t understand.

Finally, it dawned on me – ココア、飽きたです sounds a lot like ここは、飽きたです (I sick of this place). So I finally found the bag of cocoa and started pointing to it, saying  ココア ココア!!

Once they finally got it everything settled down. But for a moment I thought I might be in some serious trouble for making a cultural faux pas. I had heard how much Japanese value social protocol, so until I realized the mistake it seemed like saying no to cocoa was a really big deal. I still feel bad about making my host mother cry.

***

Have any of you had similar linguistic misadventures? Please let me know in the comments section. Note that if your story is really good I might have to steal it for my presentation!

Japanese “Western” style weddings are awesome

I recently saw someone tweet this:

The Japanese are brilliant at creating unnecessary rules and rituals for adopted western ceremonies. Particularly weddings. Urgh.

Many apologies, Zee-chan, but your statement has inspired me to say something about Japanese weddings. Essentially, that thing is this – I understand the frustration, but for all the ritual and pomp and circumstance, Japanese wedding ceremonies serve a worthy purpose that deserves respect. In fact, the rigidness and ritualistic aspects are kind of the whole point!

Again, I don’t want to single out Zee-chan. I don’t know her and it’s just one tweet, so I have no idea what she is thinking in detail. She just got me thinking about the topic.

But I will say this – I personally have long had complaints about the typical Japanese “western” style wedding, and I know that many other Westerner expats have them too. They tend to consist of sentiments like:

  • Japanese Western weddings are phony-seeming because they are held in a Christian chapel even though the couples and families are rarely practicing Christians

  • It’s weird that they hire white people to act as fake priests

  • They are unnecessarily expensive

  • The cash gifts requested of guests are too high

  • Rules for how to hand out gifts, greet the bride and groom, etc. are too rigid

Many of those criticisms are all well and good, but in general I want to just tell everyone to give Japanese weddings a break! People all over the world have a need for ceremony, and it isn’t fair for outsiders to be dismissive of the necessary rituals for marriage.

For my wedding to Mrs. Adamu way back in 2007, we went through a very conventional wedding planner, but insisted on doing things very simply and in our own way. We had no “ceremony” to speak of since we are not religious. Instead, we skipped directly to the reception and invited only close family and friends to a restaurant of our choosing. We asked one of our close friends to em-cee, created the invitations and audio-visual content ourselves (an MP3 mix and PowerPoint presentations!)

We did this first and foremost because we wanted things to be more intimate and customized to our style, in order to make it more memorable. But another reason we insisted on doing it this way was because we hated the Japanese “Western” style weddings so much and didn’t want to do full Japanese-style either. We openly thought the Western ones were stupid, especially the fake priest thing, and even tried to convince some of Shoko’s friends of this (unsuccessfully).

Well, we had the ceremony and it was a success beyond our expectations. We dressed in kimonos, Mrs. Adamu’s friends performed for us at the after-party, and we were able to bring the two families together (my immediate family flew into Tokyo for the occasion).

We were so proud of how it turned out, and we look back at that day very fondly. But after everything went down, it dawned on me – in terms of the benefits, our wedding was not that different from other Japanese couples who went the more traditional route. Here are some of the good things about having a “proper” wedding:

  • It lets the people in each circle (family, friends, coworkers, bosses) know in a very public way that the two of you are coming together, and it gives the people a chance to meet the other person as well as the other side’s family members

  • More critically, it is a public meeting of the two families to show (and usually give a speech explicitly stating) that they are in favor of the union

  • It gives everyone a chance to celebrate the union and in a way say goodbye to the single person they knew – the speeches and performances by friends are part of this

  • For the couple, it is their chance to know that they are accepted, see that people are happy and celebrating, and thus feel like a real married couple

  • Doing all this formally and in public makes it all official – this was hard for me to appreciate before having gone through it, but if you’re young and not married this is a bigger deal than you might think. For example, my father died a while after this, and for whatever reason I feel better knowing he was able to see me get married.

  • Oftentimes, the gifts collected exceed the cost of the wedding itself, and thus help fund the couple’s new start together

  • It is the bride’s day to live her dream, dress up nicely, and be the complete center of attention on one very special day.

  • And of course, the proceedings are documented on video and in thousands of pictures, to share with the people who couldn’t attend and to look back on years later.

These will definitely vary for each couple/family (and of course it’s somewhat idealized), but I think it’s a decent approximation.

And for all this, it doesn’t really matter what specific form the ritual takes, as long as people recognize it as an official and real wedding ceremony. So if it takes hiring a random white person, signing a fake contract, or whatever, so be it.

It might go without saying, but a wedding day isn’t all about the couple getting married – it also has to (at least mostly) meet the expectations of the guests, especially the parents. And in the case of many Japanese people, that means checking off all the boxes on the “wedding ceremony” order form. It might be expensive, gaudy, “fake,” etc, but it fulfills a very real social need.

This is mostly my own tale of coming to my senses and growing up about the importance of the wedding ceremony. So I am not sure how much this applies to other people, but at any rate I wanted to get this story off my chest.