Japan Unveils New Green Taxes

by Mary Swire, Tax-News.com, Hong Kong

23 November 2009

The Japanese Environment Ministry has unveiled a plan to impose a new system of taxation on fossil fuels in a bid to reduce carbon emissions and raise about JPY2 trillion (USD22.5bn) in new revenues.

The new taxes, tentatively scheduled to be in place next April, would see taxes imposed on all fossil fuels, including imports of crude oil. The taxation of coal would be the most harshly taxed, with the tax rate increasing five-fold to JPY3.55 per kilo. The rate of tax on electricity would double from the current level of JPY0.52 per kilowatt hour to JPY1.04 per kilowatt hour.

The current JPY25 per liter provisional tax on gasoline will be abolished in April 2010, to be replaced with a new tax charged at JPY20 per liter - in line with the government's pledge to cut tax for motorists.

The government has calculated that these increases in taxation would cost households an extra JPY1,127 annually on average.

The proposals have been submitted to the governmental Tax Commission, which will discuss whether to implement the new taxes.

Prime Minister Yukio Hatoyama recently announced his ambitious goal of cutting Japan's greenhouse gas emissions by 25% by 2020.

Hatoyama's long-term objective for the country is to reduce Japan's dependence on imported foreign crude oil and encourage the development and use of renewable energy sources.

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