News On Japan

Foreign instructors feel pinch of new invoice system

TOKYO - Japan's new invoice system, designed to accurately track consumption tax payments, began this month. However, concerns and opposition persist among freelancers and small business owners.

Meet Mitchell Brown, an English conversation instructor from Canada.

Brown: "This is my monthly income before paying taxes and health insurance."

He earns approximately 240,000 yen. After deducting taxes and other expenses, he takes home around 150,000 yen.

In the future, the burden of consumption tax will further reduce his take-home pay.

Brown: "If I have to pay consumption tax, it will be 131,516 yen. On top of that, I have loans, expenses for my child, and soaring electricity bills. Who can make ends meet?"

Brown works for the major English conversation school "Gaba." In reality, Gaba's instructors are not employees but "individual business owners" who contract with the company on a commission basis and receive compensation.

Until now, there has been a system that exempted consumption tax payments if the annual revenue was less than 10 million yen. English conversation schools could also deduct the consumption tax paid to instructors.

However, starting this month, if instructors do not register under the invoice system and remain as "tax-exempt entities," the schools will no longer be able to deduct as much consumption tax, leading to a greater tax burden.

English conversation schools have already issued the following notice to their instructors:

Notice from GABA Co., Ltd.: "To continue our contract, registration with the invoice system is necessary. (Starting from October), we will only contract instructors who have registered with the invoice system."

Brown, who has a 5-year-old child, has registered, but considering education expenses, returning to his home country, Canada, is also an option.

Brown: "My wife is still supporting our household by working overtime even after her shift ends. While we can manage financially, it's not the work-life balance I desire."

The Japan Fair Trade Commission has called on companies to avoid unfair contract terminations or discounts in dealings with tax-exempt entities.

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