Japan’s parliament has passed a new tax that targets anyone exiting the country. Japan’s departure tax is already known as the Sayonara tax, this new law goes into effect in January 2019 and it requires anyone leaving Japan to pay ¥1,000 upon departure. At current exchange rates, ¥1,000 yen is a little more than $9.
Do you often travel to Japan for business? While $9 may not sound like a lot to add to your travel expenses, this new law could impact travel to Japan for both the better and the worse. Here’s a look at the new law’s fine details, as well as a glance at how it just might affect business travel.
The Nuts and Bolts of the Sayonara Tax
This new tax applies to all travelers leaving Japan by either plane or ship. That means both Japanese citizens and foreign visitors are obligated to pay the tax — so this isn’t a law targeting just visitors.
How will the tax be paid? It will simply be added to fares paid for air and ship travel. But there are two important exceptions to this new law.
- First, children under the age of 2 are exempt from paying.
- And, second, any passengers leaving Japan within 24 hours of arriving are also exempt from paying the tax.
Why is Japan Levying This New Tax?
According to Straits Times the motivation behind this new law is simple: Japan expects to raise about ¥42 billion each year directly through this tax. By law, the money raised through the “sayonara tax” will go toward improvements to infrastructure and tourism-related services.
For example, funds raised by this tax will be used to add multilingual guides to cultural sites and national parks, as well as to install facial recognition gates. A portion of the funds raised will also be used to promote Japanese tourism more broadly.
Of course, the timing couldn’t be better for Japan to begin taxing departures. Tokyo will host the Olympics in summer 2020, and the Japanese government is hoping to see an enormous spike in visitors before, during and even after the Games.
In 2017, more than 28 million foreigners visited Japan. The government is expecting that number to climb above 40 million in 2020 — which would lead to a huge increase in revenue via this new tax.
Other Countries With Similar Departure Taxes
This is the first new tax that the Japanese parliament has authorized since 1992. But, before anyone thinks of Japan as greedy in the lead up to hosting the Olympics, it’s important to note that other countries already charge similar taxes to those leaving.
Australia first enacted its Passenger Movement Charge in 1995, and today that tax costs Americans about $45 each time they leave (depending on exchange rates). Brazil, Jamaica and Honduras are among other countries that require visitors to pay some sort of fee upon departure.
Departure Tax Pros and Cons for Business Travel
What does this new “sayonara tax” mean for Americans traveling to Japan for business? Here’s a look at the pros and cons:
- Short or Scrapped Trips: The 24-hour exemption on paying the tax could lead to shorter trips. If you fly in for a meeting in the morning and fly out that same day, there’s no tax to pay. But, of course, that would mean brutal back-to-back red-eye flights for Americans, unless traveling from other Asian countries. Some other trips may get scrapped altogether due to rising costs. Of course, from a different perspective, shorter trips or fewer trips may be seen as a pro rather than a con by some business travelers.
- A Closer Watch on Exchange Rates: The fee itself isn’t much when you consider its face value. And that’s by design: The Japanese government has positioned itself to enjoy a significant revenue boost without placing too large a burden on travelers. But, if the yen gains ground on the dollar, the cost of shifting currency values would be magnified by an extra charge like the “sayonara tax.”
- Better Travel Experiences: In the long run, business travelers should enjoy better airport experiences and improved infrastructure in Japan thanks to this new law. Japanese lawmakers included specific language that limits the use of these new tax revenues to tourism-related projects.
It’s still many months before the tax goes into effect. But, when it does, it’s likely that this tax is too small to make a material difference in the travel habits of American companies. That said, only time will tell if this tax changes the behavior of business travelers and what kind of impact it will make on doing business in Japan.
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