Japan considering raising tobacco tax in FY 2010+

TOKYO, Dec. 3 Kyodo -
The government is considering raising Japan's tobacco tax by around 3 yen per
cigarette starting in fiscal 2010 to ''improve public health,'' ruling party
lawmakers said Thursday.

If realized, the average price of a pack of cigarettes in Japan will be around
360 yen, though still far below the price charged in the United States and
Europe.
The government's key tax panel has been hammering out differences of opinion
within the ruling coalition.
According to government sources, the tax hike of between 2 to 4 yen in fiscal
2010 has been under consideration and there is also a plan to continue
increasing the tax in stages from fiscal 2011, instead of raising it by a large
margin at once.
Prime Minister Yukio Hatoyama and the health ministry are strongly in favor of
raising the tax for the purpose of promoting good health, while the Finance
Ministry has second thoughts about going ahead with the huge lift partly due to
concern over a possible fall in tax revenue in tandem with a decline in
cigarette consumption.
Still, the ministry estimates that Japan's annual tobacco tax revenue will
increase by about 136 billion yen if the government decides to raise it by 1
yen a cigarette.
The health ministry had hoped the tax would be increased by about 10 yen a
cigarette.
Japan last raised the tax in fiscal 2006, when it was increased by 0.85 yen per
cigarette.
Tobacco tax revenue is projected to total around 2 trillion yen in fiscal 2009,
of which about 60 percent will be allocated to local governments.
The lawmakers, meanwhile, said the Tax Commission has decided to maintain the
current special tax breaks for families with children between the ages of 16
and 22 in the year starting in April, despite a shortfall in tax revenue.
As the government led by the Democratic Party of Japan plans to make
high-school tuition effectively free from fiscal 2010, there were opinions
within the panel that some overlapping features of existing tax breaks and the
government's key promises on boosting household income must be eliminated.
Many lawmakers of the ruling coalition have been reluctant to raise taxes
before the House of Councillors election in July.
Under the current system, the amount to be deducted from income is up to
630,000 yen annually for families with children in that age bracket in
consideration of the increasing burden from education costs.
The government, however, is still planning to abolish general income tax
deductions for dependents in fiscal 2010 in exchange for offering monthly
allowances to families with children up to junior high school age, according to
the lawmakers.
The tax credit applies to families with children under the age of 16 and
dependents who are between the ages of 23 and 69.
People with disabilities will not be affected by the abolition of general
income tax reductions, the lawmakers said, adding tax deductions for spouses
will not likely be repealed in fiscal 2010.
With regard to the children allowance program, at the center of the DPJ-led
government's mainstay programs, the panel has decided to exclude it from
taxation, the lawmakers said.
The advisory panel to Hatoyama is accelerating discussions toward the end of
this year in preparation for revising part of Japan's taxation system in fiscal
2010.
In a related development, the commission has decided to keep a tax waiver on
naphtha in place in the coming year, taking into consideration strong
opposition to its abolition from the Ministry of Economy, Trade and Industry
and the business community.
Senior vice industry minister Teruhiko Mashiko told reporters about the panel's
decision after holding talks with his counterpart from the Finance Ministry,
Naoki Minezaki.
Whether to maintain the exemption on naphtha, a raw material for plastics and
other petrochemical products, was one of the hottest issues of debate over tax
reforms for fiscal 2010 because the continuation would lead to more than a 3
trillion yen fall in revenue.
==Kyodo
2009-12-03 23:13:32