FY2010 Tax Reform Requests
The Japan Automobile Importers Association (JAIA, Chairman: Hans Tempel) has submitted to the Japanese government the requests set out below on auto-related taxes.
The auto market in Japan has been hit severely since the economic crisis of last year.
A further drop was avoided thanks to the tax cuts and purchase subsidies implemented by the former administration. Unfortunately, however, those programmes brought almost no benefit to the luxury and import segments of the market, and the share of imported cars in the overall market fell below six percent in the first half of this year.
Since the change of government two months ago, various discussions have taken place for the formulation of the budget for the next fiscal year. In September, JAIA submitted a Tax Reform Request for FY 2010 to the Automobile Business Association of Japan for inclusion in the position of the automotive associations. A similar proposal was subsequently submitted to the Ministry of Economy, Trade and Industry, the Ministry of Internal Affairs and Communications and the Ministry of Environment. Details of the requests are described below:
１．Abolition of the Acquisition Tax and the Tonnage Tax
１） The provisional rates of Automobile Acquisition Tax and Tonnage Tax, for which a ten-year extension was approved in 2008, should be abolished immediately.
２） On top of that, the fundamental reform of the taxation of automobiles scheduled for FY2011 should be brought forward and these taxes should be abolished completely, since the rationale for levying them has been lost upon their inclusion into the general revenue account.
２．Ideal Automobile Taxation for the Future
１） Auto users in Japan bear a heavy tax burden for vehicle ownership and usage, in addition to vehicle acquisition. These taxes should be streamlined and reduced to the international level.
In particular, when the taxation system is revised, the overall level of auto related taxes must be lowered.
２） If the taxation of automobiles is revised to prevent global warming and promote the development of low-carbon society, the levying system should be based on fair criteria regardless of technology (technology-neutral) including, among others, taking into account CO2 emissions.
３．Review of the Eco-Car Tax Incentives
１） With regard to the eco-car tax incentives that take into account the need to provide an economic stimulus as well to protect the environment, provisions that result in disadvantages for imported vehicles should be avoided by adopting globally-harmonized standards, including the methods of measuring fuel efficiency, exhaust emissions and others.
２） Concerning the various special tax measures relating to motor vehicles:
・The incentives related to the Automobile Tax, which are scheduled to be discontinued as of the end of this fiscal year, should be extended;
・Incentives for idling-stop models and flexible fuel vehicles should be added; and,
・Incentives for clean diesel vehicles should be enhanced.
The taxes levied on automobiles in Japan are complicated, wide ranging and onerous.
Compared with other countries, they are 50 percent higher than in Germany and about three times higher than in the US. Sales of automobiles are in an overwhelmingly severe situation when compared with other consumer durables (such as home appliances).
The new administration has already announced a plan to abolish the provisional rates of the Acquisition Tax and Tonnage Tax. JAIA hopes that this plan will be implemented quickly. JAIA’s proposal that these taxes should be eliminated entirely reflects the fact that they have lost their rationale now that their revenue is no longer used exclusively for road construction
Further, in the mid-term, auto-related taxes in Japan should be brought down to a globally comparable level through streamlining and tax reductions.
JAIA members provide Japanese customers with a wide range of products that reflect the culture and technology of their country of origin. While hybrid vehicles attract attention in Japan, overseas manufacturers make products with a good economic and environmental performance based on a broad-range of fuels and technologies. The technological approach may differ, but the purpose is the same as that of Japanese carmakers. That being the case, tax systems to reduce global warming and to promote a low-carbon society should be neutral and fair, regardless of the technology adopted. For example, equal opportunities should be granted to diesel and fuel-cell vehicles. And tax levels should be objectively based (e.g. on CO2 emissions).
Unfortunately, few imported models qualify for the tax incentives for eco-friendly car. This does not mean that imported models are any less environmentally friendly than their domestic counterparts. Rather it is the result of the differences in fuel efficiency and emissions measuring modes as well as certification procedures between Japan and other countries.
JAIA hopes that in future global standards will be adopted the do not put imported cars at a disadvantage due to differences in the type of fuel or technological approach. Above all, any particular taxation scheme should not limit the choice of users.
So that overseas manufacturers can develop products that conform with any new taxation scheme adopted by Japan, they need a longer lead time than their Japanese counterparts. JAIA requests that this too should be taken into account.
Just as vehicles made in Japan enjoy success in overseas markets, JAIA hopes that imported vehicles may enjoy unimpeded access to the Japanese market.