Photo/Illutration A duty-free counter at a shopping mall in Fukuoka (Asahi Shimbun file photo)

Japan plans to revise its consumption tax exemption system for foreign visitors to halt illegal resales within the country of goods bought at duty-free stores.

The system exempts souvenirs and other items purchased at such stores from the consumption tax if the goods are taken out of the country. The use or resale of duty-free purchases within Japan is prohibited.

Currently, the consumption tax is not levied at the time of purchase.

But the government is thinking about charging the tax when the items are bought and refunding the equivalent tax amount upon confirmation of the departure of the goods from Japan, likely at airports.

Such a system has already been introduced in many countries in Europe and elsewhere.

Duty-free sales procedures in Japan were fully computerized in October 2021, and a government analysis of the data showed that many of the goods bought by big spenders were not leaving Japan.

In fiscal 2022, 51,726 people each spent between 1 million ($6,800) and 10 million yen on duty-free goods, while 1,838 people each spent between 10 million and 100 million yen, sources said.

Moreover, 374 people spent more than 100 million yen each, for a total of 170.4 billion yen that year. That works out to an average of 450 million yen per person, they said.

Customs officials, in cooperation with airlines, inspected 57 of the 374 big spenders.

Only one person was confirmed to have taken the duty-free items out of Japan. Authorities could not identify the duty-free items purchased by many of the 57.

“Many high-value purchasers may be reselling the items domestically,” a government source said.

The government sent notices to the 56 other people to pay consumption tax, but only one person has paid the levy. The remaining 55 are in arrears for a total of 1.85 billion yen, the sources said.

Tourists are required to present their passports when they buy products at duty-free stores. But when they leave Japan, they are usually not checked to ensure they are taking the duty-free goods with them.

The Japanese government will identify problems with the system over the next year and hopes to introduce new measures as early as in fiscal 2025, the sources said.

In December 2022, the Tokyo-based Japanese subsidiary of U.S.-based Apple Inc. was found to have been charged about 14 billion yen for the consumption tax over duty-free sales of iPhones and other products.

Tax authorities confirmed transactions that did not meet the duty-free requirements, including one case in which a visitor bought many Apple devices in Japan and resold them overseas through a vendor.

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