December 8, 2016

JAMA Comment on Japan’s Fiscal 2017 Tax Reform Plans
Hiroto Saikawa, Chairman, Japan Automobile Manufacturers Association, Inc.

Japan’s ruling coalition today approved tax reform plans for fiscal 2017 (ending March 31, 2018). In view of the current status of the domestic automobile market in terms of vehicle sales, we would like to express our deep appreciation for the efforts made to overhaul Japan’s automobile taxes in the formulation of those plans.

To relieve vehicle owners of the excessively burdensome taxes imposed on them, JAMA had requested reductions in the automobile tax and the extension of tax incentives for the purchase of eco-friendly vehicles. We are pleased to note that provisions in the new tax reform package reflect our requests, with measures envisaged for reduced taxation of vehicle ownership and with the continuation of the tax incentive scheme for eco-friendly vehicles, which furthermore aims to minimize restrictions on the scope of eligibility.

More specifically, that tax incentive scheme will not only be maintained but will continue to apply to designated vehicles complying with 2015 fuel efficiency standards, thus providing wide eligibility for the incentives. We hope this initiative will help revitalize the domestic vehicle market. At the same time, JAMA recognizes that false claims regarding vehicle fuel efficiency are of the utmost concern, undermining the very foundations of the tax incentive scheme. The need for the automobile industry as a whole to strive to prevent the reoccurrence of such actions cannot be overstated.

With respect to our request for reductions in the automobile tax, the tax reform plans adopted today include a pledge to “make every effort to prevent abrupt fluctuations in demand prior to and following the increase in the consumption tax rate to 10 percent.” To that end, “before announcing the fiscal 2019 tax reform plan, […] comprehensive studies will be pursued with regard to reducing tax burdens related to automobile ownership, with measures devised accordingly.” Again, we express our appreciation for these initiatives.

Finally, we also welcome the continuation of current tax system provisions related to the promotion of research and development. A policy of particular significance for the automobile industry in Japan, which is actively advancing the development of automated driving technologies and next-generation vehicles, it will, we believe, be a positive factor in the industry’s push to strengthen corporate competitiveness.