Japan Govt Looks for Way to Collect Consumption Tax on Overseas Game Apps by Having Tech Giants Pony Up

The Yomiuri Shimbun

13:37 JST, November 14, 2023

The government, looking to collect consumption tax on the sales of smartphone game apps distributed by overseas companies, is considering levying a tax on the tech giants that operate the app stores that facilitate the transactions, it has been learned.

More and more countries around the world have been taxing platform companies such as Apple and Google, and Japan would be following suit by developing such a tax system.

According to multiple sources, the issue will be discussed in detail among the main topics of the ruling bloc tax research commission, which will officially begin meeting as early as Friday.

Many overseas creators or distributors of game apps are small- and mid-sized companies that do not have offices in Japan, and in some cases have not been aware of their obligation to pay consumption tax or intentionally neglect filing tax returns.

That has led Japanese game companies and overseas companies with subsidiaries in Japan that pay taxes to complain that the system is unfair.

The government’s Tax Commission, an advisory panel to the prime minister, said in a report released at the end of June, “Taking into account competitive fairness both domestically and abroad, it is necessary to raise the issue to ensure the proper levying of the consumption tax.”

According to the Internal Affairs and Communications Ministry, total sales of mobile apps in the Japanese market currently amounts to $28.4 billion (¥4.3 trillion), a 1.5-fold increase from that four years ago. Game apps accounted for about 60%.