Bringing That Revenue Back

Paid downloads from foreign websites are not taxed in Japan, and many Japanese vendors have moved operations abroad to take advantage of the lax rules.

Independent research has determined that in 2012 alone the government lost out on $240 million in consumption taxes through legal downloads from abroad.

This potential missed revenue will go up this year as the consumption tax is to increase from 5 percent to 8 percent in April.

The government wants to put a law in place as soon as possible to collect money from download businesses, according to Japan’s main financial newspaper, the Nihon Keizai Shimbun.

Local vendors without the wherewithal to move overseas are at a disadvantage, being forced to charge the tax to consumers.

A representative of the Ministry of Finance told the newspaper that negotiations are “still ongoing” but that the levy will definitely go into effect sometime before the consumption tax is raised again in October 2015 to 10 percent, even though the government has not given final approval of that hike.

As to how the government will implement a tax on entities that exist overseas, it hasn’t said yet.

Physical products purchased abroad are taxed when they enter the country, but it’s much more difficult to police electronic products that come in through web channels.