Japan expands tax-free list to encourage tourist spending
August 25, 2014 12:43 By The Straits Times/ANN
Come October, Japan is giving foreign tourists a new - and tax-free - incentive to visit.
Those buying confectionery, cosmetics and health goods will no longer have to pay tax on them from Oct 1, when these items are added to the country's tax-free list.
After welcoming a record 10.3 million overseas visitors last year, the government wants to keep the cash registers ringing, but is concerned that the sales tax will dampen spending.
This went up from 5 per cent to 8 per cent last April, and is expected to rise again to 10 per cent in October next year. Hence the tax-free move.
Foreign tourists who spend more than 5,000 yen (US$48) at designated tax-free shops just need to show their passports to have the tax portion deducted at the point of purchase.
Singaporeans made up nearly 2 per cent of foreign tourists to Japan last year.
Business consultant Teng Theng Dar, 62, said that he usually spends about 5,000 yen (US$48) on chocolates for family members and friends, and up to 20,000 yen (US$191.9) on cosmetics for his wife on his Japan trips.
"When they become tax-free, I will also want to buy health goods or supplements," the frequent traveller told The Straits Times.
The Japanese authorities are banking on visitors like Teng to not only keep buying, but to spend more as well. According to surveys by the Japan Tourism Agency (JTA), the purchases of foreign tourists account for some 30 per cent of their total travel spending within Japan.
"Shopping is a strong motive for foreign tourists visiting Japan," said a spokesman for the JTA, the agency tasked with enhancing Japan's attractiveness as a tourist destination.
"In many cases, Asian tourists are actually taking home consumables that were not exempt from tax," she said.
Currently, foreign tourists have to buy more than 10,000 yen (US$96) worth of items such as apparel, appliances or branded goods to qualify for tax exemption at about 5,700 designated tax-free shops.
These shops are mostly major department and electronics stores, as well as branded goods boutiques in Tokyo and Osaka.
To claim a tax refund, the tourists have to show their passports and then fill in a tax-exemption form at a special counter with their receipts.
All this will change from Oct 1, when the tax-free list expands to include cosmetics, food, alcohol, medicine and even batteries.
More importantly, what it means for foreign tourists is that they will pay less for a wider range of goods, and will also be spared the cumbersome form-filling to claim a tax refund.
The JTA hopes this will "increase travel consumption within Japan", said its spokesman.
Foreign tourists spent more than 463 billion yen on shopping last year, with almost half the amount on consumables. Tourist expenditure boosts consumer spending by about 1 per cent of Japan's gross domestic product.
The JTA is working to double the number of tax-free shops by 2020, to include more small shops and to have more of them in the regions, especially those selling local specialities or delicacies, to help promote tourist spending in the prefectures.
Drugstores, cosmetics shops and sake stores are some of the new shops seeking licences as tax-free premises.
Consumables sold at these shops, which will have the words "Japan. Tax-free shop" on the storefront, will carry special labels indicating to shoppers that they are meant for overseas consumption.
The Japan Shopping Tourism Organisation, whose members comprise the major players in tourism such as travel agencies and department stores, said that shops have expressed strong interest in its seminars on applying for tax-free shop status, with hundreds signed up at each of the seven events it has held so far.
Meanwhile, major department stores are gearing up for more business from foreign tourists when the new tax-refund scheme goes into effect.
The Daimaru Matsuzakaya chain, for instance, said it has hired more staff who can speak English, Chinese or Korean.
Other department stores such as Sogo & Seibu are investing in machines that will read tourists' information digitally, thus resulting in less paperwork for tax refunds.