Tobacco tax hike in 2010 in cards

Prime Minister Yukio Hatoyama has flagged a tobacco tax increase as a focal point of tax reforms in fiscal 2010.

"Raising the (tobacco) tax is a step in the right direction," Hatoyama said Friday

His remarks came the same day the government's tax commission finished accepting tax reform proposals for fiscal 2010 from government ministries and agencies.

On Sunday, health minister Akira Nagatsuma stressed the need for a hike in the tobacco tax.

"A pack of cigarettes should be priced in the same range as in European countries, partly because of health problems," he said on TV.

According to the health ministry, a pack of cigarettes costs the equivalent of 850 yen in Britain and 550 yen in France, far more expensive than 300 yen in Japan.

The proposal for the tobacco tax increase came from the Ministry of Health, Labor and Welfare for the fourth consecutive year.

Currently, tax revenue from sales of a 300-yen packet is 8.7 yen per cigarette.

The central and local governments together collect more than 2 trillion yen in tax revenues from tobacco sales.

Hatoyama previously instructed the tax commission to weigh the "hazardous effects on health" when considering a tobacco tax hike.

Past proposals for a tax hike were killed off by farm lobby Diet members from the Liberal Democratic Party backed by tobacco growers.

Hatoyama also said the government would fulfill the Democratic Party of Japan's campaign promises to scrap gasoline and other road-related surtaxes in fiscal 2010.

Gasoline prices are subsequently expected to fall by about 25 yen per liter, resulting in a fall of 2.5 trillion yen in tax revenues at the central and local governments.

Some government officials had called for the surtaxes to be phased out over several years, instead of all at once, to secure funds for the DPJ's policy programs.

Hatoyama was also cautious about a proposal to introduce a new environment tax to tackle global warming in exchange for the abolition of gasoline and other road-related surtaxes.

"It's difficult to raise taxes for environmental causes after scrapping the surtaxes, unless we get public support for such a proposition," he said.(IHT/Asahi: November 2,2009)