Japan is considering introducing cashless tax refunds for inbound travelers, as part of efforts to prevent them from illicitly earning money by reselling tax-free items before departure, sources close to the matter said Tuesday.

Under the envisaged system, the government would have foreign travelers pay for products that include the consumption tax, which would be later refunded through a credit card or other cashless format, the sources said.

File photo shows an electronics store in Tokyo's Akihabara district in December 2023. (Kyodo)

Cash refunds at airports will remain available, but the government will encourage visitors to receive cashless refunds to avoid congestion at airports, said the sources. It aims to include the details of the system in tax reform plans for fiscal 2025.

In Japan, foreign tourists are exempted from paying consumption tax when purchasing goods totaling 5,000 yen ($32) or more as long as they intend to use the items in their home countries.

To prevent them from consuming or reselling tax-free items while traveling in Japan, the products are packed and sealed in bags or boxes before leaving the country.

If customs officials find that the travelers are not carrying the tax-free items they have bought, they are asked to pay the consumption tax.

But there have been a number of cases where travelers purchase massive amounts of tax-free items and resell them for profit at tax-inclusive prices before departing Japan, according to the sources.

Under the planned system, passports would be scanned at airports to allow customs officials to check a traveler's purchase history. Duty-free shops will then be notified if they are carrying the purchased products with them at the time of departure, the sources said. After receiving the notification, the shops would complete the refund.

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