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Tuesday, Dec. 22, 2009

Hatoyama one out of two on policy vows

Gas tax stays, no cap on allowance

Staff writer

Prime Minister Yukio Hatoyama decided Monday to stick with one of his key policy pledges but to abandon another, saying the government will not set an income cap on the child-care allowance but will maintain the current gasoline tax rate.

Both were key elements in the Democratic Party of Japan's policy pledges in the election last summer that the DPJ won in a landslide.

"I came to the viewpoint that society as a whole should bring up children," Hatoyama said. "Therefore, I have decided not to set an income limit."

Hatoyama added that a new donation scheme will be set up at local governments to give affluent families the opportunity to return the allowance.

He decided to effectively maintain the gasoline tax at its current rate, even though the provisional surcharge will disappear. A new tax will be created to replace the provisional tax, he said.

Hatoyama said the government will study the feasibility of introducing an environment tax over the next year.

He also reiterated his support for raising the tobacco tax in fiscal 2010. Just how big an increase it will be is expected to be decided Tuesday.

The gasoline tax and child-care allowance were the two major roadblocks in the way of completing by the end of the year, as scheduled, a draft of next year's budget.

During the campaign last summer, the DPJ called for introducing a universal child allowance of ¥26,000 a month per child regardless of a family's income, based on the notion that society as a whole should support child-rearing.

The DPJ also promised to abolish surcharges on road-related taxes, which amount to about ¥2.5 trillion in revenue a year, to reduce the burden on motorists.

However, DPJ Secretary General Ichiro Ozawa demanded last week that the administration impose an income cap on households eligible to receive the child allowance and retain the gasoline surcharge.

Speculation had been rampant that Hatoyama would knuckle under to both of Ozawa's requests.

While apologizing for not keeping the party's pledge to abolish the gasoline tax, Hatoyama said it makes sense in terms of both the environment and declining tax revenues.

He said he grew profoundly conscious of the need for environmental protection when attending the U.N. climate conference last week in Copenhagen.

"Our party has certainly called for (the abolition of) provisional tax rates in our manifesto, so I have to honestly apologize for not being able to follow the manifesto," Hatoyama said.

He also said he decided to reduce by 50 percent the national portion of the car weight tax.

Gasoline is currently taxed at a fixed rate of ¥53.8 per liter, of which ¥25.1 accounts for the provisional portion, which was introduced in 1974 to fund building and maintaining roads.

The government is expected to approve an outline of fiscal 2010 tax reform proposals Tuesday and finish drafting the fiscal 2010 budget this week.

Finance Minister Hirohisa Fujii has said the Cabinet will try to finalize the tax reform outline Friday.

Information from Kyodo added

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The Japan Times

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