A cut in the consumption tax rate on food and beverages would reduce the annual income of about 800,000 small and medium-sized farms across Japan by more than 300 billion yen, according to a think tank estimate released Saturday.
Because many of these farms are partly or fully exempt from remitting the current 8 percent consumption tax included in the prices of the farm products they sell, cutting the tax rate to 1 percent would reduce their income and could accelerate the trend of farmers quitting the industry.
While the actual impact would vary depending on the size of the farm, the estimate by Mitsubishi Research Institute put the average annual income loss at about 400,000 yen per farm.
The government, which is considering cutting the tax rate from April 2027, is expected to provide subsidies and other financial support to farms.
Under the consumption tax system, businesses deduct the tax they pay on purchases of goods such as fertilizers and agricultural machinery from the tax they collect on sales of their products, then remit the difference to the government. Small and medium-sized businesses, including farms, may be partly or fully exempt from doing so.
A reduction in the tax rate on food and beverages would reduce the income of farms because they would continue paying the current consumption tax on fertilizers and agricultural machinery, while the amount of tax included in the prices of the products they sell would decline.
Among sectors, the share of small and medium-sized producers is particularly high in agriculture, making the sector more vulnerable to the tax cut’s impact.
Kimio Inagaki, a research fellow at the institute, estimated the financial impact based on data including farm size and sales revenue. According to the estimate, about 700,000 of Japan’s roughly 820,000 farms are fully exempt from the consumption tax, while about 85,000 are partly exempt.
© KYODO
