A Few More Words on the Fukuda Gasoline Tax/Road Construction Proposal

Note that in item 2 of his proposal that I wrote about here, Prime Minister Fukuda proposes to convert the gasoline tax into general-purpose revenue as part of “the fundamental reform of the tax system”. This is a killer for the DPJ. It’s bad enough for them that it puts the matter a couple of fiscal years into the future at the very earliest; it will also expose the weakness of its position on funding for the public pension system without a tax hike. Its current piecemeal approach makes it easier for it to avoid facing the cumulative revenue effects of its “out-promise the LDP and deal with the consequences when we win” strategy that they’ve adopted under Ichirō Ozawa. An overall review will make it difficult for the media not to notice.

In the meantime, Sankei continued pushing its interpretation － the DPJ has the ruling coalition and the Fukuda administration in particular in a panic － with this story. They run under different bylines, and I don’t see any of the other major dailies going nearly this far, so this must be a uniquely Sankei narrative. I see the immediate political situation quite differently, which has been the point of my earlier posts, here and here. Sankei, of course, is highly critical of any deviations from the dynamics that the Koizumi reform had put into place (and also supportive of Prime Minister Koizumi’s romps on the hallowed grounds of the Yasukuni Shrine), so it’s actually more aligned with the opposition on this. I think that its apprehensions － well-founded, by the way － are clouding its judgment of the overall situation.

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For the record, here’s a translation of a more complete version of Mr. Fukuda’s proposal:

1) Enactment of the fiscal year 2008 revenue bills within this [2007] fiscal year.
2) The road-specific fiscal funds shall be reviewed with a view to its inclusion in the general-purpose fiscal funds on the occasion of the fundamental reform of the tax system. The fiscal funds of the local governments shall be protected on that occasion.
3) The road provisioning mid-term plan shall be reviewed, including the period of the plan, on the basis of new data on demand, etc.
4) Transparency and discipline with regard to the road budget shall be [promoted], including expenditures to public interest legal entities.
5) I request that [you] consult with the opposition parties after coordinating within the government parties on the basis of the above points.

The hardcopy Yomiuri article also carries the following estimate, surely courtesy of the Fukuda administration, in 100 million yen units, of the road-specific fiscal funds for FY 2008:

State: Volatile oil tax 27685 ( of which 13843 temporary); petroleum and [natural] gas tax 140 (0); automobile weight tax 5541 (3097); total 33366 (16940)
Local: Local road transfer tax 2998 (461); petroleum and gas transfer tax 140 (0); automobile weight transfer tax 3601 (2013); automobile acquisition tax 4024 (1309); light oil transaction tax 9914 (5281); total 20677 (9064)*.
Total: 54043 (26004)

So that’s the breakdown of the 2.6 trillion yen overall loss in revenue and the 0.9 trillion yen loss to the local governments that the ruling coalition is always talking about.

*Transfer taxes are collected as national taxes and automatically transferred to local governments.