The Yomiuri Shimbun March 24, 2014
Browbeating smaller firms to avoid consumption tax burden unforgivable
The increase in the consumption tax to 8 percent from the current 5 percent, effective from April 1, is drawing near.
While it is important to have the consumption tax increase included in the prices of goods, it also is essential to provide appropriate and easy-to-understand information of prices after the tax hike on products and services to avoid confusing consumers.
With the tax increase close at hand, many companies, including restaurant chains and railway operators, have been publicizing their plans one after another to add the tax hike to their prices.
A number of companies, meanwhile, plan to leave their prices unchanged in the face of the higher consumption tax. Corporate efforts to maintain current prices can certainly be called a significant pricing strategy.
However, unlawful attempts by major companies to use their strong positions to force subcontractors and wholesale suppliers to keep prices down must never be condoned. Such illegitimate actions could cause the business situations of many small and medium-size enterprises to deteriorate.
In October last year, the government put into force a law on special measures to ensure the smooth and proper shifting of the tax increase to prices and prohibiting efforts to refuse to pass the higher tax on to prices. A team comprising about 600 monitors has been set up to clamp down on refusals to shift the consumption tax increase on to prices. The monitors will maintain a tight rein over violations.
It is problematic that 850 businesses had been given administrative warnings over suspected violations across the country as of the end of February.
There is a possibility that major firms’ moves to try to force the higher tax burdens unlawfully on their subcontractors and suppliers may spread further after the consumption tax increase to offset increased tax burdens of the big firms. The government must maintain utmost vigilance.
Tax-exclusive price tags
A number of subcontractors and suppliers with business ties with large companies are likely to be reluctant to report to the government in the event of big firms refusing their requests to increase their prices, out of fear that their business partnerships could be severed in retaliation.
After the April 1 tax increase, the Fair Trade Commission and the Small and Medium Enterprises Agency plan to survey about 4 million small and midsize companies on the tax hike situation. The survey should help prevent unfair business transactions.
The government should not merely wait for businesses to provide relevant information. It should aggressively carry out fact-finding activities, such as by conducting hearings.
It is important for subcontractors and suppliers to take steps to defend themselves, such as documenting in detail the process of pricing negotiations with large companies.
Retailers generally have been obliged to put tax-inclusive prices on their products to enable customers to understand at a glance how much they have to pay, but the law for the special measures acknowledges that price tags might exclude the tax.
Given that the consumption tax is scheduled to be raised again, from 8 percent to 10 percent, in October 2015, this provision is aimed at allowing retailers to avoid changing price tags again.
Retailers should ensure that their prices are easy for consumers to understand, regardless of whether they include the tax hike or not.
Railway and bus fares in some regions are to be raised in increments of ¥1 for users of IC cards, while fares for those who pay in cash will be raised in ¥10 increments for the same railway and bus service sections.
It is quite possible that train and bus passengers will express dissatisfaction over the “double fare” structure. Efforts must be made to thoroughly familiarize passengers with the new fare system.
(From The Yomiuri Shimbun, March 24, 2014)