Ways to Offset Regressive Impact of Consumption Tax Hikes
On the regressive impact of consumption tax, refundable tax credits, and tax rate reductions
June 26, 2012
Summary
◆A bill to raise the consumption tax to 10% is currently being debated in the Diet. Consumption tax is a regressive form of taxation, taking a higher percentage of low incomes than high ones. As such, measures will be needed for low-income earners to counter the regressive impact of higher consumption tax.
◆In this report, we use a Q&A format to explain the regressive impact of consumption tax, refundable tax credits, and tax rate reductions.
- Why is consumption tax regressive?
- Why do some say consumption tax is not regressive?
- How can low-income earners offset the regressive impact of higher consumption tax?
- What systems are in place for refundable tax credits?
- Could refundable tax credits also be applied to high-income earners?
- What goods and services would be subject to tax reductions?
- Why should tax reductions be accompanied by an invoice system?
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