A consumption tax is levied on goods and services purchased by customers, and is added to the retail price. The Japanese government introduced a 3% consumption tax in April 1989, and raised the rate to 5% in April 1997. In its July 2000 medium-term report, the government's Tax Commission suggested raising the consumption tax rate further. The Ministry of International Trade and Industry is calling on retailers and service providers to use invoices which include tax payments, to prevent them from cheating on the consumption tax. Debate over the consumption tax is likely to heat up in Japan. In the U.K., Germany and other European countries with value-added taxes, which are equivalent to a consumption tax, retailers and service providers usually include the tax in the final price. To protect consumers, member countries of the European Union are encouraging all retailers and service providers to adopt this practice.
Often associated with taxes collected at the cash register, but any system that does not double-tax savings and investments is a consumption tax. The flat tax and the "consumed-income" tax (basically an unlimited individual retirement account) are consumption-based income taxes.