Car taxes could be cut next year

November 2nd, 2011 by Philip Brasor & Masako Tsubuku

Old or new, buy later and save!

When you buy an automobile in Japan you pay a bunch of taxes. And when you own an automobile in Japan, you pay a bunch even more taxes on a yearly or biannual basis. Since car sales are considered an engine of the economy second only to home purchases in terms of consumer spending, the government wants more people to buy cars and is thinking about slashing these related taxes.

A tax study group is now discussing the abolition of the jidosha shutokuzei (car purchase tax), which currently amounts to 5 percent of the price paid for a regular automobile and 3 percent for a “mini” (kei) car whose engine displacement is 660 cc or less. This tax is levied on all car sales, new or used, of over ¥500,000 and goes to local governments. Since it’s estimated that car purchase tax revenues for fiscal 2011 will amount to ¥200 billion, it’s quite a sacrifice, but the auto industry has taken a pounding since the March 11 disaster and taxes constitute a fairly large portion of the outlay for a car purchase.

However, there’s more. The Ministry of Economy, Trade and Industry, as well as the various related industry associations, are pushing for eliminating or reducing other auto-related taxes, in particular the annual automobile tax, which is ¥39,000 for passenger cars and ¥7,200 for kei cars. Then there’s the juryozei (weight tax), which is levied at the time of purchase and then every time the automobile is brought in for its mandatory vehicle inspection (shaken) and brings in about ¥700 billion for the central government. That’s ¥37,000 for a vehicle of less than one ton, ¥56,000 for vehicles between 1 and 1.5 tons, etc. Then there’s also a special tax just for kei cars, and, of course, don’t forget that consumption taxes apply to all purchases of cars and parts, not to mention gasoline taxes.

Local governments will probably have something to say about the reduction of all these taxes since they are the main beneficiary. The provisional tax reduction for automobiles designated as being environmentally friendly (eco cars) is scheduled to end on April 30 of next year, and the study group is thinking of eliminating or at least greatly reducing both the car purchase tax and the weight taxes for eco cars in order to promote their sale. In any event, if and when the reductions are approved, they won’t go into effect until fiscal 2012.

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