More and more studies are coming out that indicate that sales tax does affect shopping habits, including last week’s Ohio study about Amazon, sales figures, and sales tax avoidance. Japan is proving that this isn’t limited to the United States. April brought a steep rise in sales tax across Japan. It’s been a long-planned and discussed change by Japan’s new leadership. What’s most interesting, however, is the effect the sales tax climb had on sales in March. It’s been 17 years since Japan has seen so much growth in one month. March retail sales were up by annually and the last time Japan saw this kind of growth was in 1997. It’s no coincidence that 1997 was the last significant increase in sales tax.
But the Bank of Japan has learned from experience and April is going as expected. Although people stocked up on items in March, including big-ticket purchases, overall the Bank of Japan expects things will go back to normal in a short period of time. The United States can learn a few lessons from Japan about national sales tax and how it affects consumer behavior. National sales tax laws make sales tax easier to understand for the general consumer so they pay closer attention to changes. Most residents of states couldn’t tell you when sales tax was being raised in their area or what certain items were taxed at, especially in areas where sales tax code is extremely complex. Japan’s sales tax, on the other hand, is much easier to understand. The tax hike in Japan isn’t a half-cent tax, like many changes in the United States. Instead, the sales tax hike increased the rate from 4% with a 1% local tax, for a total of 5%, to 8% total.
In October 2015, the tax will increase another 2% to bring the total sales tax to 10%. It very well might be that significant changes where sales tax is doubled have a much broader effect on consumer behavior than small incremental increases over shorter periods of time. In the end, there’s really no denying it. Sales tax does affect consumer behavior and there’s plenty of evidence to prove that.
