TOKYO, June 23, 2022—U.S. President Joe Biden June 22 announced he’s asking Congress a federal gasoline tax holiday to ease consumers suffering soaring prices, but Japan’s Fumio Kishida may demur in emulating Biden’s footsteps as the Japanese prime minister is confronted by the stubborn hushed opposition of the Ministry of Finance bureaucracy as unprecedented.
On June 22, a House of Councilors (upper house) election was called for voting on Sunday, July 10. Voter attention has swung sharply from the Ukraine-Russia war, COVID-19 and Kishida’s macroeconomic policy, to spiraling goods prices as gasoline prices threaten to breach 200 yen per liter even with government subsidies to refiners that started this spring.
In a political debate session hosted by the Japan National Press Club this week and ensuing occasions, Kishida concentrated his discussions on doubling Japan’s defense spending to 2 percent of GDP in relation to the Ukraine war, COVID-19 vaccination promotions and relaxing foreign tourists to Japan with limited quarantine regulations, and his ‘New Economic Policy.’ He spared little time in policies to restrain rising goods prices that are gripping consumers and producers alike, as well as tightening energy and electricity supply except to say that the government would introduce a credit point system for families that conserve electricity. Opposition party leaders demanded that the government suspend the 10-percent sales tax and the gasoline tax of 53.8 yen per liter.
The gasoline tax was introduced as a 5-year sunset tax in 1974 and though it was debated in parliament, the tax has remained a permanent general revenue tax to this day. Also, the motor vehicle tonnage tax, which is collected on the basis of vehicle weight, was introduced in 1971 as a means of financing local highway construction and is collected on top of the motor vehicle tax, resulting in double taxation in probably violation of Japanese tax law. There has been no parliamentary debate to review those taxes. After the 2011 earthquake tsunami natural disaster, the government enforced a provisional 2.1 percent ‘Reconstruction Financing Tax’ on on top of the income tax in 2013. The tax is scheduled for repeal in 3037 but whether it actually happens is unknown.
Numerous other taxes in Japan that had been introduced as sunset taxes have become permanent and their original target expenditures have disappeared. It is because of the Ministry of Finance’s historical policy of never repeal a tax, whether it is permanent or provision, once introduced. ‘A state means tax revenue,’ Makoto Utsumi, a former MoF vice minister for international finance, had told me by drumming his chest. ‘It’s the power of the state.’
Uncompromising tax collection authority is the MoF bureaucracy’s policy and source of authority over taxpayers, including lawmakers. Court cases in which the tax authority had lost are few and most of them concerned areas that the inward-thinking bureaucrats are unfamiliar, such as transfer-pricing taxation on profit allocations between Japan and other countries.
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Insight Into the Future