Causing Electricity Rates to Rise! Unknown Inconveniences of the “Invoice System” Not Only for Sole Proprietors
The biggest problem is that the system is in a state of “paper mache” and it is difficult to grasp the whole picture.
On February 28, “Don’t pass the invoice system without permission” became a trending topic on Twitter. Despite numerous voices of opposition from various industries, including construction, logistics, lawyers, and the cultural and artistic fields, the House of Representatives passed a bill to revise the invoice system on the same day.
Some people on social networking sites say, “It is just that sole proprietors did not pay the tax they should have paid,” “It is unfair that sole proprietors have been exempted from taxation until now,” or “This is not relevant to company employees.
We asked writer Natsumi Koizumi, a founder of the “Freelancers’ Group for the Invoice System” (STOP! INVOICE), a group of citizen volunteers, about the problems and current status of the invoice system.
I have never met a single member of the Diet who is in favor of the invoice system based on a proper understanding of it.”
The invoice system itself was passed in 2016 in conjunction with the reduced tax rate, but as the start date (October 1, Reiwa 2023) approached, various industry groups began to point out the problems and voice their opposition.
In response to these voices, the government announced “drastic easing measures” in December of last year. Simply put, it is a system under which those who convert from tax-exempt to taxable businesses are offered a limited time tax reduction so that they can switch while the savings are still good.
Originally, the invoice system also included ‘transitional measures,’ but in essence, the aim is to gradually transition both tax-exempt businesses and users of tax-exempt businesses, rather than suddenly impose a 100 percent burden on them.
This may sound like a kind measure, but it is not. ……
However, the invoice system itself is very difficult to implement, and then all sorts of relaxations and exceptions have been introduced, so the system has become a piece of paper. Even tax accountants, who are tax practitioners, point out that the system is difficult to understand and operate.
In fact, during the past year, our members have met with 100 Diet members from both the ruling and opposition parties, and not once have we met a single member of the Diet who has a proper understanding of the invoice system and is in favor of it. Even members of the ruling party, for example, when I explain the mechanism on the ground as to why the animation industry would be tilted by the introduction of invoicing, they respond, ‘It’s a problematic system.
Still, they say, ‘It’s something that has already been passed, so it can’t be helped. If the law can be amended for complicated mitigation measures to advance the system, why can’t a simple law be amended to stop or extend the system? I can only wonder.”
What is an “invoice” anyway?
Invoice” is too complicated and difficult. Many people who hear the term “qualified invoice” may have no idea what it means, or may not be interested in it at all.
If you are not interested in it, you can skip this section if you want.
An invoice is a document that specifies the exact applicable tax rate and tax amount for each business transaction. It is a system that corresponds to the current consumption tax system, in which the standard tax rate of 10% and the reduced rate of 8% (for food and beverages and newspaper subscriptions published more than twice a week) are mixed.
The seller is obligated to deliver an invoice when requested by the buyer. However, only “taxable enterprises” registered with an invoice issuing business entity are eligible to deliver an invoice. Tax-exempt business operators” with annual sales of 10 million yen or less are not qualified to issue invoices unless they voluntarily give up their tax-exempt status and become a “taxable business operator.
Consumption tax is “neither an obligation to keep it from the consumer nor an obligation to pass that price on!”
Some say, “It is unfair that sole proprietors were exempted from the consumption tax, which they originally had to pay,” and “company employees are losing money.” However, they say that the root of the problem lies in the fact that the “consumption tax” is not properly understood.
The word ‘consumer’ is actually missing from the ‘Consumption Tax Law. What is often misunderstood is that, for example, if a cup of coffee costs 550 yen including tax, the consumer pays 50 yen, which is the consumption tax, and the store pays the 50 yen it receives from the consumer directly to the government.
I have always thought so, too, but the Consumption Tax Law only stipulates that the taxpayer is the business, and does not specify who bears the tax, in other words, who bears the consumption tax. Furthermore, there is no obligation to collect consumption tax from consumers, nor is there any obligation for stores to pass on the consumption tax to consumers in their prices.
Therefore, a store may add 50 yen for the consumption tax and charge 550 yen including tax, or it may offer coffee for 500 yen including tax if it is difficult to attract customers at 550 yen due to many competing stores. Anyway, the only thing that is decided is that 10/110 (or 8/108) of the price decided by the business is the consumption tax portion, and the store pays it to the government after calculating the consumption tax.
When we are working against invoices, we often hear people say, ‘Don’t steal the deposit money,’ but to begin with, the consumption tax is not a tax system like the bath tax, where the tax “received” from the customer is paid directly to the government from right to left.
In February of this year, the rationale for the introduction of the invoice system was undermined…
The “bathing tax” on hot springs and bathhouses is paid directly to the government on deposits, so businesses gain nothing and lose nothing. On the other hand, the consumption tax is a tax on sales and labor costs, so it is a harsh tax system that requires tax payments even if the business is operating at a loss, and therefore has the highest rate of tax delinquency. However, the current situation is that the system is not well understood.
In the midst of this situation, the government admitted at a February 10, 2023, meeting of the House of Representatives Cabinet Committee that the consumption tax is not a deposit and therefore there is no profit tax, undermining the rationale for its introduction.
The electricity rate hike was to make up for the loss caused by the introduction of the invoice system!
Some may still think, “It doesn’t matter if I am a sole proprietor or not. Surprisingly, however, what is not known is the “electricity rate hike” that concerns everyone.
While the whole of Japan is screaming for an increase in electricity bills, five of the 10 major electric power companies have applied to the government for an increase in electricity rates starting in April. Does this mean that the price will go up even more on top of that?
Yes, it does. The Agency for Natural Resources and Energy has decided to make up for the losses incurred by major electric power companies and others due to the introduction of the invoice system by raising electricity rates, and it was revealed at a February 21 meeting of the House of Representatives Finance and Finance Committee that the amount will amount to 58 billion yen annually after seven years, when the transitional measures for the invoice system expire.
Many people may say that this is news to them. Why would the introduction of an invoice system lead to an “increase in electricity prices”?
For example, at the end of last year, the Tokyo Metropolitan Government passed an ordinance requiring that solar panels be installed on new buildings.
In this way, ordinary households that are currently taking advantage of the FIT (Feed-in-Tariff) system, which allows electric power companies to purchase renewable energy power at a high fixed price, will become “business owners” who sell renewable energy power to the power companies, but it is unlikely that ordinary households will issue invoices. However, it is difficult to imagine that ordinary households would issue invoices.
If this is the case, electric power companies that do not receive invoices from households will not be able to deduct taxes on purchases, and the consumption tax burden will be enormous.
Thus, the tax burden on electric power companies caused by the introduction of invoices is to be compensated for by raising our electricity bills, which is the issue at hand. Every industry is suffering from the consumption tax imposition and tax payment burden caused by the invoice system, so why are the electric power companies the only ones getting help?
If this kind of thing can be allowed to go unchecked, the sole purpose of the legislation, ‘proper taxation,’ will be blown away.
Also, for company employees, if the invoice system is enacted, they may be upset by their supervisors and accounting firms because the company will lose money if they do not use an invoice-registered business. For example, the following situation can be assumed.
The company is angry with you because the coffee shop you use for company business is out of their own pocket, or they tell you to use a store that provides invoices from now on. When I realized that the coffee shop I was familiar with had gone out of business: ……
In business dealings/ Boss: “From now on, don’t use freelancers who are tax-exempt businesses” → Subordinate: “The freelancers I ask every month are good and it’s easy because they can do everything for me without having to explain…” → Explanation of the time and work involved in finding freelancers who can issue invoices. This is a lot of work that should not have to be done in the first place.
Is it okay to say, ‘There are a lot of problems, but it’s already passed, so it can’t be helped?
Also, some people have pointed out about small businesses, saying, “If you are driven out of business by something as simple as an invoice, then you are probably not cut out for that job in the first place. ……
A taxable business is one with annual sales of 10 million yen or more, but it is said that about 90% of freelancers are tax-exempt businesses.
Some people say, ‘If you are a taxable business, you should try to sell more than 10 million yen a year.’ However, not everyone works for sales first and foremost. I think this is a completely misguided point.
In the first place, with no wage increase for 30 years plus the COVID-19 crisis, it would be more difficult to use the invoice as an opportunity to negotiate a salary increase for a client company that is in a more advantageous position than you are.
It makes no sense and is unforgivable that electricity bills are being raised even higher to compensate the power company! How can those who think “I don’t want my favorite restaurant to go out of business” or “I don’t want my favorite cartoonist or animator to go out of business” speak up? Mr. Koizumi suggests the following method.
You can also send an e-mail to your favorite TV/radio programs, web media, or celebrities who have the ability to send out messages, and ask them to “Take up invoice! to your favorite TV or radio programs, web media, or celebrities who have the power to communicate. If you are planning a workshop, we can help you as much as we can.
You could also try a demonstration or a stand-up.
Currently, nearly 200 local assemblies have submitted opinion letters to the national government asking for the suspension or postponement of the invoice system. In order to support this movement, “STOP! Invoice” is planning to send a petition to each local council asking them to postpone or review the invoice system under the title of “Operation Letter. We have already sent the first batch of petitions to 47 prefectures and 20 ordinance-designated cities in February. It would be a good idea for everyone to send a petition to the local assembly in your area or to encourage local legislators you know to submit a petition.
Also, since there will be local elections in April, I would encourage you to ask your local city council members what they think about invoice and how well they understand it. Then, based on the candidates’ answers, please take your voting action.
I think there are many city council members who take the stance that ‘invoice is not relevant because it is a matter of national politics,’ but we don’t want to have a council member who doesn’t understand that invoice is a major part of the local economy.
There are more citizens than there are politicians, so each and every one of us should speak up first.
Interview and text by： Wakako Tago
Born in 1973. After working for a publishing company and an advertising production company, became a freelance writer. In addition to interviewing actors for weekly and monthly magazines, she writes columns on dramas for various media. His main publications include "All Important Things Are Taught by Morning Drama" (Ota Publishing), "KinKi Kids Owarinaki Michi" and "Hey! Say! JUMP 9 no Tobira ga Open Tokimono" (both published by Earl's Publishing).