Japan to Phase Out Automobile Tax

TOKYO--Japan's industry minister said Friday that the car purchase tax will be scrapped in two phases by the time of a planned rise in the country's sales tax rate to 10%. "Taking into account the issue of double taxation, it has been decided to lower it (the car tax rate) in two phases and to abolish it eventually," Toshimitsu Motegi, minister of Economy, Trade and Industry said Friday. Japan's leading automobile lobbying group is urging the government to lower the auto tax by 3 percentage points, first when the sales tax rises to 8% next year, and then to scrap it when the 10% consumption tax rate is scheduled to take effect in October 2015. The current rate is 5% for standard-size vehicles. While Japan's auto industry -- one of the country's mainstay industries -- is worried about a possible plunge in auto demand when the sales tax rate is raised in April 2014, some lawmakers are concerned about how to make up for the reduced tax income that would be caused by phasing out the car tax. The Japan Automobile Manufacturers Association estimates that the consumption tax's rise to 8% will cut annual auto sales by 580,000 vehicles to 4.03 million units compared with levels at the current 5%. The resulting loss of production would cut as much as 0.8% off gross domestic product and prompt the loss of 170,000 jobs. Once the tax rate hits 10%, JAMA predicts sales would fall by 930,000 vehicles, in comparison to the current rate, slicing 1.3% off GDP and resulting in 270,000 lost jobs.