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Govt, LDP Discuss Increasing Taxation on Foreign Visitors; Abolition of Tourist's Consumption Tax Exemption Urged
Yomiuri Shimbun file photo
The Liberal Democratic Party's headquarters in Chiyoda Ward, Tokyo.
There are growing discussions within the ruling Liberal Democratic Party about how to tax the rapidly increasing number of foreign visitors to Japan more effectively. The LDP argues that abolishing the consumption tax exemption and raising the International Tourist Tax (departure tax) would also help to combat overtourism.
A group of LDP lawmakers on Thursday handed proposals to Itsunori Onodera, chairperson of the LDP's Policy Research Council, and Yoichi Miyazawa, chairperson of the party's Research Commission on the Tax System, calling for the abolition of the consumption tax exemption.
Introduced alongside Japan's consumption tax in 1989, the exemption is based on the international principle that consumption tax is levied at the point of consumption. However, there have recently been an increasing number of cases of abuse of the system, with large quantities of tax-exempt goods being purchased and resold for profit.
In response, the government plans to revise the current system of selling goods without consumption tax being imposed at duty-free shops and instead implement a 'refund system' from November next year, whereby consumers will receive the amount paid in consumption tax at the time of departure. If abuse occurs, the refund will not be paid.
Nevertheless, the lawmakers argue that abuse cannot be prevented if duty-free shops and international visitors collude, and therefore the tax exemption should be abolished.
'Offering a 10% discount (by not imposing the consumption tax) to encourage people to buy overseas brand-name goods (in Japan) is not the vision of a tourism-oriented country that we are aiming for,' said Kenji Nakanishi, a member of the House of Representatives.
The government and the LDP are also considering increasing the departure tax. Introduced in 2019 as a source of revenue for tourism promotion, the tax imposes a ¥1,000 levy on passengers departing from Japan, regardless of nationality. The tax is added to airline and cruise ship ticket prices.
At the House of Councillors Budget Committee in May, Prime Minister Shigeru Ishiba stated that visitors to Japan also use Japan's infrastructure and that 'paying appropriate compensation is an obligation that they owe Japanese taxpayers,' indicating his intention to consider raising the tax.
There are countries and regions with higher departure taxes than Japan — Australia imposes a 70 Australian dollar (approximately ¥6,600) levy, while Hong Kong charges 120 Hong Kong dollars (approximately ¥2,200).
According to the Japan National Tourism Organization, the number of foreign visitors to Japan in 2024 increased by 47.1% year-on-year to reach 36.87 million. Visitors are arriving at a record-breaking pace this year, making measures to address overtourism an urgent issue.
