I got a question about how taxes work in Japan the other day from a Twitter follower, so I thought I’d write about that. By and large, Japan models its tax system on that of the United States, and the details of how taxes are declared and collected are quite similar between the two countries, as are the tax rates. Some differences do exist, however. For example, when J-List pays the salaries of our employees, the equivalent of Social Security (the National Pension System) is not automatically deducted but must be paid by the individual manually. Although everyone who isn’t enrolled in the similar Welfare Pension System (for employees of larger companies) is required to make National Pension payments, many young people don’t bother since the consensus is that the system won’t be worth much when it comes time for them to retire. Another difference is how taxes must be pre-deducted when making some payments to individuals. For example, if we were going to pay a designer to create a spiffy T-shirt for our site, we’d have to withhold 10% of his payment and send it to the National Tax Office on his behalf, something that’s not done in the U.S. The consumption tax in Japan is a reasonable 5%, and since the tax is always hidden in the displayed price, no one thinks about it much.
Taxes in Japan are similar to the U.S., with a few differences.
