EDITORIAL: Reviving road surcharges

The Diet tussle over gasoline and other taxes earmarked for road funding is now approaching a climactic moment. The ruling coalition has decided to use its two-thirds majority in the Lower House this coming Wednesday to enact the government-drafted bill to revive the surcharges imposed on these taxes, invoking a constitutional provision to override Upper House opposition.

Prime Minister Yasuo Fukuda is trying to win public support for the step, saying the expiration of the surcharges at the end of March will blow a massive hole in the budget unless the levies are restored. He has also promised to transfer the earmarked tax receipts into the general revenue account so that the money can be used for health care, child care support and other programs.

How many of Japan's wary taxpayers will buy Fukuda's argument?

The surcharges--imposed in the form of "provisional" higher rates--have already expired, and consumers have been enjoying lower gasoline prices, though for only less than a month.

Legally speaking, enacting the tax bill will mean raising taxes, rather than maintaining existing levies. Persuading the public to support any tax hike requires a strong case.

A recent Asahi Shimbun survey found 63 percent of the respondents opposing the legislative action to restore the surcharges.

And 58 percent of the pollees voiced support for the idea of shifting the road-financing taxes into the general revenue pot.

During course of Diet deliberations on the road-funding system, shocking revelations emerged about how money from the road funds has been diverted to all kinds of unjustifiable expenditures, from musical performances and the purchase of massage chairs to leisure trips by employees of road-related public corporations. There are also a raft of road projects of dubious necessity.

This wasteful spending of taxpayer money will continue ad infinitum if the surcharges are simply restored. It is crucial to prevent that from happening. One way would be to end the earmarking of the taxes to free up revenue for high-priority spending in welfare, education and other key policy areas. The first step toward that goal would be to mingle the money with general revenue. This is how many Japanese think about this issue.

In response to the public sentiment, Fukuda proposed to make the money available for any program in the fiscal year that starts April 1, 2009. But it is hard for most taxpayers to believe his plan will be implemented exactly the way he describes. They suspect this reform will likely be watered down to a very weak broth by politicians within Fukuda's Liberal Democratic Party serving the interests of road-building industries.

It is obvious what the prime minister must do to get public backing for his initiative. He must implement all the possible measures for his proposal now, instead of postponing them until fiscal 2009.

Let us be more specific. On May 12, it will become possible for the ruling coalition to use its dominance in the Lower House to legislate a bill to maintain the current system to devote revenues from the gasoline and other road-financing taxes to building roads.

This bill, which would extend the funding program by 10 years, is inconsistent with Fukuda's vow to abolish the system at the end of fiscal 2008. At the very least, it must be revised to ensure the program will not stay in place beyond the end of fiscal 2008.

Fukuda's promise would become even more convincing if the bill is killed.

Next, Fukuda should have the fiscal 2008 budget rewritten to reduce the outlays for road projects sharply and use the savings for other items. In other words, he should start taking possible steps right now to honor his promise to free up the road-funding revenues without waiting until fiscal 2009.

Some legislative measures will be required to make it possible for local governments to use the money thus made available as general revenue funds. But that won't be impossible.

Fukuda should announce these measures and immediately start working to carry them out. Unless he demonstrates his commitment to the initiative by such a dramatic gesture, his promise will be seen as mere hot air.

As things stand now, the ruling camp can make no convincing case for reviving the surcharges in the forceful means it plans to employ.

--The Asahi Shimbun, April 24 (IHT/Asahi: April 25,2008)