Fukuda's surprise tax plan denied

Prime Minister Yasuo Fukuda on Thursday made a surprise new proposal to break the logjam on road taxes, but the opposition parties--and even members of the ruling coalition--were not satisfied.

Prime Minister Yasuo Fukuda

A number of members of the road lobby of the ruling Liberal Democratic Party expressed their opposition to Fukuda's plan to convert all road tax revenues to general budget use from fiscal 2009.

Opposition Minshuto (Democratic Party of Japan) rejected the package immediately because it did not contain a key demand--the abolition of so-called temporary road tax rates.

It now appears certain that the temporary higher gasoline tax rate will expire on Monday, leading to a drop in gas prices of 25 yen per liter.

The government had been seeking passage of legislation to extend the temporary higher gas tax rate, which has in fact been in place for decades, for at least another 10 years.

At a hastily called news conference during which Fukuda announced his new proposal, the prime minister was asked if he had obtained the ruling coalition's approval.

"Although ruling party members have many different opinions, I believe that in general it has been accepted," he said.

At the same time, Fukuda said he could not call for an abolition of the temporary road tax.

"That would mean the loss of 2.6 trillion yen in revenues," Fukuda said. "Abolishing that from fiscal 2008 is just not a realistic argument."

Minshuto executives held a meeting in the Diet on Thursday evening and agreed that Fukuda's new proposal did not address their main concern.

"Now is the time to abolish the temporary tax rate," acting party leader Naoto Kan told reporters. "On that point, Prime Minister Fukuda's stance is totally opposed to the argument and opinion of Minshuto. Unfortunately, there is no way in which we can accept the proposal."

Fukuda also promised to reduce the duration of the road construction plan from the current 10 years to five years. The 10-year plan calls for spending a maximum of 59 trillion yen on road construction, but Fukuda said that figure would also be recalculated.

Fukuda also apologized for recent revelations about wasteful spending of road tax revenues on such items as karaoke machines and massage chairs. He promised to abolish or privatize public-interest corporations that depend excessively on road tax revenues as well as to eliminate unnecessary spending of the funds.

The coalition also made a separate proposal to prevent confusion if all of the special tax measures bundled together with road taxes in legislation before the Diet were to expire Monday. The proposal would extend for a month the deadline for all special tax measures, with the exception of the temporary road tax.

The proposal is a form of compromise to Minshuto, which has submitted legislation to extend special taxation measures, except for the temporary road tax.

Officials from the ruling coalition and opposition parties are expected to meet today to discuss the coalition's and Fukuda's new proposals.

If the two sides agree on the ruling coalition's proposal and pass legislation through the Diet by Monday, the expiration dates for special tax measures other than the temporary road tax rate would be extended for a month.(IHT/Asahi: March 28,2008)