Saturday, March 22, 2008

Update on Gasoline Tax/Road Construction Proposal

Yesterday, a Friday, Sadakazu Tanigaki and Tetsuo Saitō, the Policy Research Council Chairmen of the LDP and New Kōmeitō respectively, dutifully consulted their peers and presented the results to the opposition parties as a six-item proposal. There are three major changes, which I show in the following translations, from Prime Minister Fukuda's original instructions. The emphasis and italics are mine, to highlight the differences:

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. In the event, necessary provisioning of roads shall be steadily implemented.

5) With regard to items 2 through 4, an organization for consultation between the government parties and opposition parties shall be established expediently and consultations shall be started.

6) With regard to matters on which agreement is achieved under such consultations, they shall be implemented in the budgets for fiscal year 2009 and beyond.

Item 5 merely changes the procedural point as Mr. Fukuda’s instructions to the two party chairmen are transcribed as a proposal to the opposition parties. Item 6 merely confirms my observation that any amendments will come at least a couple of years into the future. It does spell out explicitly the practical implications of item 2, which still reads, “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.” This is, I repeat, a killer for the DPJ.

The most significant change by far is the addition in item 3. The words do not on their own have any operative meaning, but were added, according to a Yomiuri report, to alleviate the New Kōmeitō’s worries. If true, the New Kōmeitō is out-LDPing the LDP on this one. The opposition will surely highlight it as the expression of a business-as-usual mentality.

The DPJ continues to say that it won’t agree to talk unless the LDP and New Kōmeitō in effect accept its proposal in its entirety, which is a kind of procedural oxymoron. To avoid the confusion over retail pricing and purchases around the expiration of the gasoline tax surcharge, it has introduced legislation in the Upper House (echoing the two-month extension that the coalition gave up under the Chairmen’s consent decree) to refund to wholesalers the surcharges for March*.

Everything indicates that the DPJ will stand pat come 31 March, and nothing the media says is going to change this situation. I am convinced that the coalition, including the Prime Minister, knows that as well. Also, note that the coalition itself cannot alter the tax bills during this Diet session without the DPJ’s consent**. Thus, the coalition is going to be stuck with the taxes and the road construction budget as-is until the next Diet session at the earliest, and most likely until the 2009 ordinary session, which traditionally convenes in January***.

One of the consequences of this outcome of this Diet session as I foresee it is that the coalition will have to come up with a credible program on the gasoline taxes and their disposal in its entirety in place, including some down payments, before it can go to the electorate. This means that the Lower House general election will come later rather than sooner. In fact, the current Lower House members now have a good chance of serving out their full four-year terms, until 2009 September.

That, of course, does not mean that Prime Minister Fukuda necessarily will be able to do so as well.

* This could create some accounting problems on its own where the gasoline has already been sold to the retailer. I’d have to read the actual bill to be sure, but I’d really have to be at a loss of things to do for that, since the coalition will surely not let the bill pass when it comes to the Lower House.

** The coalition can, of course, alter the bill in the Upper House and send it back for a simple majority revote in the Lower House if it can get the Communists and Socialists on board. But it's easier to, say, make Australians stop killing kangaroos.

*** As a matter of pure speculation, the Prime Minister can summon a long and early ordinary session that covers the usual “extraordinary” session that is now commonly summoned in the autumn. If that happens, it will surely go down in history as the Long Diet.

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