Environmental Policy

Report on Auto-Related Environmental Taxes_8. Medium- and Long-Term Agenda

8. Medium- and Long-Term Agenda

In addition to the short-term undertakings mentioned above, the following issues on auto-related taxation need to be addressed to meet environmental conservation purposes. These issues should be discussed as medium- and long-term agenda. In discussing them, a broad range of views, ideas, and opinions need to be exchanged across various sectors of society to promote understanding among citizens.

(1) Differences in Tax Rates and Tax Amounts between Light Vehicles and Other Vehicles
While light vehicles are currently subject to light vehicle tax rather than automobile tax, and while the rates and amounts of taxes levied are different from those of other vehicles, emissions regulations imposed on light vehicles are no different from those imposed on other vehicles. Since some recently developed automobiles are as fuel-efficient as light vehicles, there is actually no major difference between these vehicles and light vehicles in terms of environmental conservation, thus raising the question of whether or not the current differences in tax rates and amounts between the two categories are appropriate.

(2) Differences in Tax Rates and Amounts between Vehicles for Commercial Use and Vehicles for Private Use
Tax rates and amounts on commercially used vehicles are set lower than those on vehicles for private use, taking into account public interests and possible influence on prices. It is open to question whether this difference is justifiable.

(3) Levels and Ideas of Fuel Taxation
Taxation on automobiles during the course of use, i.e. taxation on vehicle fuels, should be discussed comprehensively considering its implication on the overall fuel taxation scheme.
In this discussion, consideration must be given to the following facts. The burden of fuel tax payment in Japan, when only the tax amount is compared with that of other countries, is relatively low. Global warming and air pollution both result mainly from fuel combustion, and how fuels are taxed influences environmental performance of all fuel-consuming sectors including households and not only auto-related industries but also other industries. With these facts taken into consideration, it should be re-examined whether the current fuel-related tax system and its levels are appropriate for preventing global warming and air pollution.

(4) Different Tax Rates on Gasoline and Light Oil
While gasoline vehicles during the course of use must pay tax (gasoline being a manufactured good) of 53.8 yen per liter of gasoline (48.6 yen as gasoline tax and 5.2 yen as local road tax), diesel vehicles pay a tax on light oil (diesel fuel being a manufactured good) of 32.1 yen per liter (light-oil delivery tax). Are these differentiated tax rates of gasoline vis-à-vis diesel fuel environmentally sound?

(5) Relation between the Costs Automobiles Bear Socially and the Tax Burden
The extent to which automobiles ought to shoulder the cost of environmental conservation in society is not necessarily clear and still needs to be defined. As to the level of tax burden on vehicles, comparing only the absolute tax amounts with those of other countries, Japan's taxes levied for driving are relatively low, while those for possession are high.
Based on these facts, are the current levels of tax burden on automobiles appropriate, in light of the costs that vehicles ought to shoulder in society? And where should these costs be placed in the entire auto-related tax systems?

(6) Economic Instruments as Transportation Policy
Some of the major developed countries have started to study the introduction of economic instruments, not only as anti-pollution or global warming measures focusing on individual vehicles but also as part of comprehensive transportation policy including the easing of traffic congestion and the promotion of the use of public transportation, e.g. railways. When discussing economic instruments as auto-related environmental measures, this kind of international trend must also be kept in mind.

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