Consumption taxes on Japan are charged on goods and services and can take various

forms. In the OECD and most of the world, the value-added tax (VAT) is the most
common consumption tax. Most consumption taxes either do not tax intermediate
business inputs or provide a credit for taxes already paid on inputs, which avoids the
problem of tax pyramiding, whereby the same final good or service is taxed multiple
times in the production process. The exclusion of business inputs makes a consumption
tax one of the most economically efficient means of raising tax revenue.
However, many countries fail to define their tax base correctly. To minimize distortions,
all final consumption should be taxed at the same standard rate. However, countries
often exempt too many goods and services from taxation or tax them at reduced rates,
which requires them to levy higher standard rates to raise sufficient revenue. Some
countries also fail to properly exempt business inputs. For example, states in the United
States often levy sales taxes on machinery and equipment.

Japan is advocated a "growth first" approach, with a high proportion of government

spending going to capital accumulation, and minimum government spending overall,
which kept both taxes and deficit spending down, making more money available for
private investment. Generally, in Japan, the local inhabitant's tax is imposed at a flat
rate of 10%. Japanese local governments (prefectural and municipal governments) levy
local inhabitant's tax on a taxpayer's prior year income. This applies where the taxpayer
is a resident of Japan as of January 1 of the current year the taxes. Japan has Tax
rates. for residents, net taxable income is taxed at graduated rates ranging from 5
(5.105) to 45 (45.945) percent as national income tax, plus 10 percent local inhabitant
tax 1. Non-residents are subject to national income tax at a flat rate of 20 (20.42)
percent. Japan is a highly developed social market economy, often referred to as an
East Asian model. It is the third-largest in the world by nominal GDP and the fourth-
largest by purchasing power parity. It is the world's second-largest developed economy.
But Japan having fought deflation for more than two decades, has repeatedly pursued
government interventions in the hope of revitalizing its economy. Prime Minister Shinzo
Abe's three-pronged approach, dubbed “Abenomics” and launched in 2013, combines
fiscal expansion, monetary easing, and structural reform.