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Friday, March 28, 2008

Fukuda offers to untie road tax income in '09

Opposition still wants higher rates abolished

Staff writer

Prime Minister Yasuo Fukuda hoped to break the Diet deadlock by declaring Thursday he is willing to allow revenue from road-related taxes to be freed up for purposes other than road projects in fiscal 2009, which starts in April next year.

But it remains unclear if the Democratic Party of Japan-led opposition camp will support his proposal because Fukuda remained vague over the provisionally added higher taxes, instituted in the 1970s as a temporary measure, on gasoline and other auto-related levies that have been the key bone of contention. The opposition wants the higher rates scrapped.

Yukio Hatoyama, DPJ secretary general, reportedly rejected Fukuda's proposal because it did not abolish the extra tax rates, which are set to expire Monday, the last day of fiscal 2007.

Separately, DPJ acting President Naoto Kan said Fukuda's "clear-cut" promise to transfer the road-related tax revenues to general appropriations is "a huge step forward" but added there is "a large difference" between the proposals and the DPJ's stance against the higher tax rates.

Fukuda hastily called a news conference Thursday afternoon and urged the opposition to hold cross-party talks with his Liberal Democratic Party-New Komeito ruling bloc.

"In order to fulfill my duties as prime minister to avoid chaos, I have been thinking that (I) need to find a way to somehow discuss (the road-related taxes and provisional rates) with the opposition parties," Fukuda said. "I have decided to boldly review" the road-related taxes.

With his proposal to scrap the system of using revenues from the taxes solely for road construction, Fukuda stressed that the money can be used for other purposes, including addressing environmental issues, the country's low-birthrate and emergency medical treatment.

At the same time, however, he stressed that he would take measures to avoid a negative effect on local-level finances.

But on the provisionally added tax rates, Fukuda only said he would be willing to hold discussions, cognizant of the state's severe fiscal situation and the worldwide trend of taxing gasoline as a deterrence to carbon dioxide emissions and global warming.

The DPJ wants the higher rates scrapped so gasoline prices would fall by ¥25 per liter. But the government argues this would cause the state and local governments to suffer a ¥2.6 trillion revenue shortfall.

"Taking into consideration whether it is possible to abolish the special tax rates from fiscal 2008, I think (the DPJ) is ignoring reality," Fukuda said. "I want the opposition parties to understand it is necessary to maintain" the higher rates.

The ruling bloc and government have been groping for a way to pass a tax reform bill that includes a clause to maintain the higher rates on gasoline and other auto-related taxes for another 10 years.

At the end of February, the ruling bloc rammed the budget for fiscal 2008 and related bills, including the tax reform bill, through the Lower House amid strong protests from the opposition. In return, the opposition camp has refused to deliberate on the budget-related bills in the opposition-controlled Upper House.

The DPJ-led upper chamber plans to reject the fiscal 2008 budget Friday.

Under the Constitution, the budget itself will be automatically enacted even if the upper chamber nixes it, but the opposition can still keep its related bills in limbo — at least until the lower chamber overrides with a second vote.

The budget and its related bills "are useless unless they are united," Chief Cabinet Secretary Nobutaka Machimura said.

If the tax reform bill is not enacted by Monday, gasoline prices may go down, but other taxes, including those on imported whiskey and cigarettes, will go up.

"There is a difference (in opinion), but we must fill in the cracks together," Fukuda said. "We have come up with this suggestion and it is the opposition parties' responsibility to respond."

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The Japan Times

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