(c) 2013, The Yomiuri Shimbun.

(c) 2013, The Yomiuri Shimbun.

TOKYO Assuming the government's plan to raise the consumption tax rate to 8 percent in April is realized, industry groups and companies are expected to take different approaches to displaying prices of their products, with the consumption tax either included or excluded.

However, if prices are displayed differently, this could cause confusion among customers who are used to seeing prices with tax included, according to observers.

Since 2004, retailers have been required by law to display tax-inclusive prices, so customers can understand how much a product costs at a glance and easily compare prices.

The government plans to raise the consumption tax rate in two stages, to 8 percent in April and 10 percent in October 2015. To prevent problems associated with changes in price labeling at each stage, it has decided to allow tax-excluded prices to be displayed for a limited period from October this year through March 2017.

Starting in October, retailers will be allowed to show prices either including the consumption tax or the prices of an item with the tax indicate separately.

As price labeling is expected to have an impact on sales following the tax rate increase, company and industry groups are taking different approaches.

In industries where retailers engage in intensive competition over prices, even to the yen, such as supermarkets, businesses are worried that consumers might believe they have raised prices when they show prices including tax, a senior industry member said. A food supermarket industry group has thus opted for a policy of displaying tax-excluded prices.

However, such a policy is not binding for the industry association's member companies. Several companies are thus likely to indicate the price the customers actually have to pay, with the consumption tax included.

Major food distributors Aeon Co. and Seven & i Holdings Co. intend to continue showing tax-included prices on products at their stores, giving priority to the convenience of consumers to understand actual prices at a glance.

However, the companies are also considering an alternative policy of showing tax-included and tax-excluded prices, to allow price-conscious consumers to grasp before-tax prices while offering them the convenience of seeing the total price.

About 16,000 member hotels and inns of the All Japan Ryokan Hotel Association plan to display prices for accommodation charges without the consumption tax, believing it would be easier for customers to accept a rise in costs if accommodation charges and the tax amount are shown separately.

The Japan Association of Travel Agents plans to show examples of how to display prices without the tax for package tours and other services to its member companies. However, "most companies will likely include the tax in their price," an industry source said.

A number of industries and companies have not yet set a policy on the price-display issue. For example, three major cell-phone service providers, including NTT Docomo Inc., currently show tax-inclusive prices, but have not yet decided how to handle the envisaged tax rate hike.

A senior official of a major company in the fast-food industry said: "Indicating the price without the tax makes it difficult for customers to tell how much they actually have to pay. This is not good in an industry like ours, where the aim is to swiftly provide quality food."

bc-japan-tax