EDITORIAL: Debate over road taxes

Prime Minister Yasuo Fukuda has finally taken action. On Thursday afternoon, with only four days left in the fiscal year, Fukuda used a hastily called news conference to outline a new compromise proposal aimed at breaking the impasse on revenue sources earmarked for road projects.

The "temporary" higher tax rate imposed on gasoline, actually put into place decades ago, is set to expire March 31.

The main points of the new proposal are as follows: Road-specific revenues would be eliminated after fiscal 2008 and converted to the general-use budget from fiscal 2009; the government's midterm road maintenance and improvement plan, which calls for 59 trillion yen in outlays over the next 10 years, would be reduced to a less-expensive five-year plan; and a council of ruling and opposition party representatives would be formed to discuss uses for the new general revenue.

But for Minshuto (Democratic Party of Japan) and other opposition parties, Fukuda's failure to concede to their demands for the abolishment of the provisional higher gasoline tax rate remains a sticking point.

Much like the recent handling of the nomination for a new Bank of Japan governor, Fukuda's proposal also came as time was running out. It is mind-boggling that meaningful action wasn't taken earlier.

In its own right, however, Fukuda's declaration to abolish the special treatment for road revenues is a watershed compromise. His stated avowal to implement this change, even if the opposition camp fails to get on board, is of major significance.

In retrospect, it was former Prime Minister Junichiro Koizumi who originally championed the cause of putting road-tagged revenues into the general revenue coffer. Koizumi defied stiff opposition from within his own ruling Liberal Democratic Party to privatize the nation's postal services.

But, even when he was prime minister, the resistance from road-lobby Diet members inevitably forced the road tax issue onto the back burner. His successor, Shinzo Abe, also found this to be a daunting policy challenge.

Fukuda, a politician who became prime minister with the backing of road-lobby legislators, has effectively declared he will proceed with this reform. While there are naturally doubts about whether the LDP will fall into line on this, it is certainly a historic resolution.

Unlike the Koizumi and Abe administrations, there was a sense that Fukuda lacked any real zeal to advance reform on the road issue. It was the power displayed by Minshuto and other opposition members that pressured Fukuda to tender this compromise.

The opposition used the Diet to expose a steady stream of wasteful spending of revenues supposedly set aside for roads. This included recreational splurging for road-related staffers, fully financed trips for bureaucrats and other abuses that outraged the public. The ensuing backlash certainly helped push Fukuda further into a corner.

The strength in numbers of the opposition parties, which hold a majority in the Upper House, was a factor in forcing Fukuda's hand. But these parties can also take pride in the fruits of the battle of words waged on the Diet floor, which has forced change in the fundamental policy of the LDP administration.

Then again, Fukuda's plan leaves the provisional gasoline tax rate in place. Minshuto rejected the new proposal on those grounds.

Yet, considering the severe financial conditions at both the national and local government levels, depleting the 2.6 trillion yen in fiscal 2008 tax revenues sourced from the road tax would be a serious blow.

Will gasoline prices continue to rise? Will tax revenues be available to shore up rickety regional finances? Confusion at the consumer and local government levels is a foregone conclusion. Taking this to heart, keeping the provisional tax rate in place for fiscal 2008 is the most realistic option.

At this juncture, the opposition forces should enter policy talks with the ruling coalition.

How can Fukuda's pledge to abolish the road tax revenue be ensured? In what way will the provisional tax rate be revised? On these and numerous other points, the opposition camp must sit down with the government side before the March 31 deadline and work out meaningful commitments.

To avoid disrupting people's lives, therefore, it's time for Minshuto President Ichiro Ozawa to also take a stand.

--The Asahi Shimbun, March 28(IHT/Asahi: March 29,2008)