Shoppers check prices marked at the Akidai Sekimachi supermarket's main store in Tokyo's Nerima Ward. May 1 (© Sankei by Shunsuke Sakamaki)
Concerns are growing within the restaurant industry over proposals by major parties in the upcoming Lower House election to eliminate the consumption tax on food items.
If the tax rate on takeout-focused supermarkets and convenience stores is reduced to zero while dine-in meals remain subject to a 10% tax, the resulting price gap is expected to widen. This risks driving customers away from restaurants.
A large share of the restaurant sector is made up of small and medium-sized businesses, including sole proprietors and micro-enterprises operating under difficult conditions.
Any tax policy, therefore, needs to account for its impact on these businesses.
Who Benefits, Who Loses
Food items, excluding alcoholic beverages, are currently subject to a reduced tax rate of 8%. Takeout bento boxes and prepared foods are also taxed at 8%, while the same items consumed on the premises are subject to the standard 10% rate.
The ruling Liberal Democratic Party pledges to accelerate efforts toward introducing a zero consumption tax on food items for two years.
Its coalition partner, Ishin no Kai, also calls for a similar policy.
The Centrist Reform Alliance, formed by the lead opposition Democratic Party and Komeito in the Lower House, proposes introducing a permanent zero consumption tax on food items.
Whichever of these pledges is realized, the consumption tax on fresh food, takeout bento boxes, and prepared dishes would fall to zero. Lower prices would inevitably encourage home cooking and take-out, while reducing demand for dining out.
The impact would be especially severe for small businesses such as ramen shops and yakiniku (grilled meat) restaurants that cannot readily shift to takeout.
A Pricing Headache
An executive at a major restaurant chain questioned the policy, saying, "If a bento box or prepared food is eaten inside the store, it's taxed at 10%. How can the price change for the same product simply based on where it is consumed?"
Another industry insider described a practical dilemma, asking, "How should we handle items that are priced the same, tax included, for both dine-in and takeout?"
Because the tax difference is only two percentage points, many major restaurant chains use uniform tax-inclusive pricing. But if the tax gap widens to 10%, maintaining uniform prices will become difficult, likely pushing more customers toward takeout.
Unintended Consequences
A drop in dine-in traffic could also force changes to store layouts and product offerings. Restaurants may also have to monitor whether customers consume zero-tax takeout items on the premises, a step that could create friction with patrons.
On the potential impact of eliminating the consumption tax on food items, Naozumi Nishimura, a professor at the Japan University of Economics, warned that some restaurant formats could be placed at a disadvantage.
"Compared with convenience store bento boxes and prepared foods, which are mainly takeout items, certain types of restaurants within the same industry would be unfairly affected," he said.
Policy adjustments would be required to address perceptions of inequity, he added.
RELATED:
- Election Pits Security and Growth Against Tax Politics
- Economy as Election Issue: Why Tax Cuts are a Risky Proposition
Author: Takehiko Nagata, The Sankei Shimbun
(Read this in Japanese)
