Publishers and distributors of e-books in Japan have voiced concern over the proposed hike in consumption tax from the current 5 percent to 8 percent by April 2014. However, while the taxation would apply to ebook publishers and distributors in Japan, the same when sourced from overseas vendors enjoy immunity from the tax net. As such, retailers such as Amazon or Rakuten’s Canadian arm Kobo are not required to pay consumption tax in Japan. This as per the local players are allowing the overseas vendors undue benefit vis-à-vis their domestic counterparts.
As per the current legal system, ebooks purchased and downloaded from servers outside of Japan are deemed transactions, and are hence considered to be outside the purview of consumption tax. It is only the items and services purchased in Japan that are subject to paying consumption tax.
“Online shoppers are sensitive to prices. One of the reasons that foreign vendors gained a large share in the Japanese market was the unfair environment regarding the consumption tax,” said an executive with bookstore operator Kinokuniya Co.
This, as per Daiwa Institute of Research Holdings Ltd. is also leading to the Japanese government losing out billions of yen in revenue every year. The loss is pegged at a substantial 25 billion yen in 2012 alone. The domestic players are urging the government to come up with a quick solution though anything of that sort seems unlikely to emerge before spring 2014 when the higher rate structure will come in place. Government sources have assured local publishers and ebook retailers they are investigating the matter and have assured a level playing field for all though that is not expected to happen anytime soon.
“At the time the consumption tax was introduced (in the late 1980s), few imagined that the Internet would develop this much. The Finance Ministry should start upgrading legislation to create a fair environment,” said Yoshikazu Miki, a law professor at Aoyama Gakuin University.