Japan Has a Revenue Hole — Plug It With Tourists

The country faces a shortfall in revenue and complaints of too many travelers. Can these problems cancel each other out?

- Gearoid Reidy

Two different stories have played out in Japan at very distinct paces over recent months.

First, a long-running debate over the amount that workers must earn before paying tax. Such policy anywhere can be a snoozefest, and nowhere more so than in Japan. Embattled Prime Minister Shigeru Ishiba, needing the support of an opposition party that made raising the tax-free threshold its signature policy, has endured months of back-and-forth debate.

The passing of the budget last week put us out of our misery. A major holdup was the concern over a supposed seven trillion (S$63 billion) to eight trillion yen gap in government coffers that would result from the change. As this debate rumbled, the unstoppable surge of tourists continued, hitting a record 3.7 million in January. Local discontent at the sheer volume of sightseers is growing, too.

The disconnect got me thinking how cheap Japan can be for visitors, even as residents face one of the world's higher tax burdens. I've long advocated to better monetize the tourism boom, so I wondered: How much of that shortfall could be made up by charging them more?

It's a stretch. Even at the 60 million tourists expected by the end of the decade, the authorities would need to levy around US$850 (S$1,100) a person to make it work. But my thought experiment did nonetheless turn up a surprising chunk of change.

VISITOR CONSERVATION LEVY First, Japan needs to tax visitors themselves. A departure fee was begun in 2019, levied on everyone leaving the country, including residents. At just 1,000 yen, it's paltry, though reports say it may be raised by up to five times.