ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Economy

Japan to overhaul auto taxes as industry transforms

New system would set fees on mileage, not volume

Vehicle ownership is expected to decrease in Japan as car-sharing gains popularity, a trend that would reduce tax revenue under the current system.

TOKYO -- Japan is revamping its automotive tax system as soon as fiscal 2020 to impose levies based on mileage, as revolutions in green and sharing technologies squeeze revenue under the current framework.

Car owners are currently taxed according to their vehicles' engine displacement, which is not an effective measure for electric and hybrid vehicles. The rise of car-sharing also means fewer people own cars at all.

The ruling Liberal Democratic Party and junior partner Komeito are expected to draft a plan in mid-December that will tax cars based on mileage and weight instead, so the government does not lose out on vehicles that are on the road.

Japan currently has three types of auto taxes. Owners pay a 3% tax on the purchase price when they buy a car, an annual automobile tax based on engine displacement and a weight tax at inspections required once every two years.

The change will apply to the annual tax, which now comes to 34,500 yen ($303) a year on cars with engines between 1 liter and 1.5 liters in volume, for example. The amount changes with every half-liter.

Japan has been trying to push more consumers to adopt environmentally friendly vehicles through tax incentives, which in turn have encouraged innovation in the industry. But basing the tax structure on usage rather than ownership could stall such innovation. Critics say the government ultimately decided to value its revenue over technological advancement.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends June 30th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media