Senior representatives of six ruling and opposition parties pose for a photo while holding the agreement they had reached on eliminating the provisional gasoline tax. At the Diet on November 5.
このページを 日本語 で読む
The Diet has decided to scrap the provisional gasoline tax rate that has been in effect for half a century.
On November 5, six ruling and opposition parties formally agreed to abolish the levy, effective December 31. Among the six parties are the largest two, the Liberal Democratic Party and the Constitutional Democratic Party of Japan. Together, they aim to pass related bills to implement the agreement during the current extraordinary Diet session.
The provisional tax rate on diesel oil will also be abolished on April 1, 2026.
Where the Gasoline Tax Stands Now
As things now stand, the total gasoline tax is ¥53.8 JPY ($0.35 USD) per liter. It is made up of the standard tax rate of ¥28.7 ($0.19) and the provisional tax rate of ¥25.1 ($0.16). In order to prevent sudden price fluctuations and to avoid confusion at sales sites, such as drivers holding off on purchases, subsidies will be used as a transitional measure to gradually lower prices. Similar measures will be taken for diesel fuel.
This will be the first measure to combat rising prices under the administration of Prime Minister Sanae Takaichi. It is estimated that the abolition of the temporary tax rate will, on average, reduce the burden on households by around ¥13,000 ($84.35 ) per year. The change will likely have a measurable effect on reducing the burden on household finances, especially in rural areas where motor vehicle use is high.
However, abolishing the temporary tax rate will also cause a decrease in tax revenue of approximately ¥1.5 trillion ($9.7 billion) per year. It will affect both the national and local governments.
Replacing the Lost Tax Funds
A decision will be made by the end of 2025 on using existing reduced special corporate tax measures, which reduce the tax burden on companies that meet certain conditions, as a source of replacement revenue. Beyond this, measures to secure stable financial resources to replace the reduced revenue should be decided within about a year.
During the Diet question session in the Lower House on November 5, Yuichiro Tamaki, leader of the Democratic Party for the People, asked about stable funding sources. However, Prime Minister Takaichi avoided giving a clear explanation.
The ruling parties do not have a majority of seats in the Diet. Therefore, they will inevitably have to make certain concessions to the opposition parties, which are calling for early tax cuts.
However, it would appear that postponing their funding contradicts the Takaichi administration's stated commitment to "responsible and proactive fiscal policies."
Opportunity to Update Vehicle-related Taxes
The opposition parties also bear a large responsibility for ensuring that stable financial resources are secured. As soon as possible, the ruling and opposition parties must hold thorough discussions and conclude measures to make up for the loss of tax revenue.
The provisional gasoline tax rate was originally a special road revenue source. But it was converted into a general revenue source in 2009 and was supposed to be done away with the following year. However, it has remained ever since, "for the time being."
The decision has been made to abolish the provisional tax rate. Nevertheless, motor vehicle-related taxes have not been fundamentally revised since their inception, which makes for a complicated tax scheme.
These provisional tax rate changes provide a welcome opportunity to spur discussions about a better tax system, with an eye to the spread of electric vehicles.
RELATED:
- Inside the LDP-Ishin no Kai Coalition Agreement
- Diesel Price Fixing is a Criminal Betrayal of the People
- LDP Candidates Should Talk About Growth Strategy, Not Just Temporary Relief
Author: Editorial Board, The Sankei Shimbun
このページを 日本語 で読む
