“First of all, the advantage of a value added tax (such as Japan’s consumption tax) is that it can be collected from a broad range of payers, and that enables limiting the rate to a relatively low level,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute. “If reduced rates are applied to too many items, that would defeat the advantages of a value-added tax and ultimately make it look more like a commodity tax.”
The commodity tax, levied on luxury items, was abolished when the consumption tax was introduced in 1989 at a flat rate of 3 percent.
“There is no regressivity in the consumption tax in the first place,” argued Kazumasa Oguro, an associate professor of economics at Hosei University, in denying the notion that the less money a person makes, the more the tax hurts.
Oguro said statistics show that most people spend all of what they earn in their lifetime, regardless of income level.
That means that over the long term, everybody will eventually contribute 10 percent of their income to the government through the consumption tax, and that there is no need to look for ways to reduce the levy on lower-income people.