Tue, November 30, 2021


Display of tax-inclusive prices becomes mandatory in Japan

Showing the total price including consumption tax on displays and advertisements has become mandatory as of April 1 for all providers of goods and services.

Under the Consumption Tax Law, displaying both the before-tax price and the tax-inclusive price is allowed, so retailers tend to accentuate the before-tax price in their price displays. Now, the actual prices the consumers have to pay must be easier to understand to adhere to the original purpose of posted prices.

■ 2 figures shown

The three major convenience store chain operators, Seven-Eleven Japan Co., Lawson, Inc. and FamilyMart Co., have displayed both the before-tax price and tax-inclusive price on their merchandise since April 2014 when the consumption tax rate was raised from 5% to 8%. Since then, they have shown the before-tax price in a larger size than the tax-inclusive price, normally placed just under the before-tax price.

“There are no specific standards,” an official of one of the operators said. “The size of the price displays is decided by the stores themselves.”

Convenience stores and other retailers, along with restaurant chain operators, have long opposed the display of total prices since the time the consumption tax was introduced. Their worry has been that consumers will be put off if it seems the prices have been raised, so they believe it should be up to stores to decide how to present price displays.

Last August, relevant industry groups submitted requests to the government for the display of the before-tax price to be allowed permanently.

Operators of supermarkets like Summit, Inc. have been changing the way they display prices. Summit, which operates supermarkets in the Tokyo metropolitan area, used to show the before-tax price of goods with the words “plus tax,” with the tax-inclusive price displayed at the register. The supermarket is now showing both the before-tax price and tax-inclusive price.

“As our customers have been accustomed to the display of the before-tax price, the display of only the tax-inclusive price would cause confusion,” said an official in charge.

■ Consumer clarity

At discount stores where low prices are their selling point, there had been cases where the before-tax price was displayed large and clear, while the tax-inclusive price was shown in a way deemed difficult to discern. At large electronics stores, there were also cases such as the before-tax price being displayed with “special price” shown next to it to make it more eye-catching.

Even when both the before-tax price and tax-inclusive price are displayed, there are fears of consumers getting the wrong idea if the tax-inclusive numbers are shown in an extremely tiny font on the price tag. If the Consumer Affairs Agency concludes that a certain display of the price constitutes a violation of the law against unjustifiable premiums and misleading representations, it may impose such administrative punishments as the publication of the names of the retailers in question or the imposition of fines on them.

The National Tax Agency, in its notice for the mandatory display of tax-inclusive prices, only goes so far as to say, however, “Price displays in which consumers mistake one price for another will not be considered as showing the total price.” The agency does not have any clear-cut standards as to what sort of displays would give consumers the wrong idea.

If cases repeatedly occur where consumers are mistaking the prices of products, there is the possibility that the relevant rules could be made more stringent.

■ Affecting sales

Retailers tend to opt for displaying both the before-tax price and the tax-inclusive price, primarily because the displays directly affect sales.

Yoshiyuki Nakazono, a visiting associate professor at Yokohama City University, conducted a survey on the purchasing trends of 50,000 people around autumn 2013 when the tax authorities allowed retailers to display only the before-tax price as a special measure. He found that sales at retailers sticking to tax-inclusive price displays declined by about 3% compared to retailers that had switched to displaying only the before-tax price.

As the preference to cut expenditures among consumers has risen amid the coronavirus crisis, they have become ever more sensitive to price trends.

“The way prices are displayed will also affect consumers’ choice of stores,” Nakazono said. “Retailers should decide on their price displays taking into account the merits and demerits.”

Published : April 02, 2021

By : The Japan News/ANN