(*The image is an image/Pixta)
Regarding the consumption tax invoice system to be introduced from October 2023, the government and ruling parties are considering proposals such as setting the tax amount to 20% of the sales tax amount when a conventional tax-exempt business becomes a taxable business. It turned out that It is positioned as a “dramatic change mitigation measure” that considers the disadvantages that small businesses and freelancers suffer, but what does it mean? I will explain with the problem.
What is the invoice system?
First, let me review what the consumption tax invoice system is.
Businesses are obliged to pay consumption tax at 10% to 8% of the price of the goods and services they sell. A common misconception is that consumers do not owe any tax.
Instead, business operators collect the amount equivalent to consumption tax on the sales price when selling goods and services. In other words, the consumer is the ultimate tax bearer and the business is the taxpayer, and the tax bearer and the taxpayer are separate. This system is called “indirect tax”.
In principle, the amount of consumption tax paid by a business operator is the amount obtained by subtracting the amount equivalent to consumption tax paid at the time of purchase from the amount equivalent to consumption tax received at the time of sale of goods and services. This calculation is called “purchase tax deduction”. As an exception to this tax calculation method, there is a “simplified taxation system” described later.
When calculating consumption tax according to the principle, receipts or invoices are required as materials to prove the amount of consumption tax paid at the time of purchase.
The invoice system is called the “qualified invoice storage method” and requires an invoice in a fixed format called a “qualified invoice” to prove the amount of consumption tax. Without an invoice, the purchase tax deduction for the consumption tax you paid is not allowed.
Problems of the invoice system
◆ “Tax exempt businesses” suffer disadvantages
Only “taxable persons” can issue invoices. A “tax-exempt business” with annual sales of 10 million yen cannot be issued (if you dare to become a taxable business, you can issue it).
Since the other party of the transaction with the tax-exempt business cannot receive the invoice, it will not be possible to deduct the purchase tax when calculating the consumption tax, which will cause problems.
Therefore, it is highly likely that the other party who does business with a tax exempt business will choose one of the following.
・Stop doing business with tax-exempt businesses and start doing business with taxable businesses
・Request a discount equivalent to the consumption tax to tax-exempt businesses
If that happens, tax exempt businesses will lose their jobs or their income will be reduced. The only way to avoid this is to become a taxable business operator and be able to issue invoices.
Since most of the tax-exempt businesses are small sole proprietors and freelancers, those people will be disadvantaged by the introduction of the invoice system.
