The ruling coalition is considering raising the tobacco tax 1 yen to 2 yen per cigarette in fiscal 2002 to help compensate for an expected shortfall in government revenues amid the prolonged economic slump, coalition officials said.
Prime Minister Junichiro Koizumi's Liberal Democratic Party will take up the issue at its Tax System Research Commission late this month, when the tax policy panel begins debating tax reforms for the next fiscal year, LDP officials said Wednesday.
"Health hazards from smoking are well known, so we could gain public understanding if we use the increased revenues for health care and medical purposes," a member of the LDP tax panel said.
An increase of 1 yen per cigarette would raise tax revenues by about 300 billion yen a year, according to the LDP.
New Komeito, an LDP coalition partner, plans to seek the introduction of "a tobacco health tax" to counter an increase in medical costs, with a view to raising the tobacco tax by 2 yen per cigarette.
New Komeito presented its proposal Thursday at a meeting of coalition social welfare experts.
Japan Tobacco Inc., the world's third-largest tobacco group, reacted with anger to the planned tax hike.
"It was raised only three years ago. Taxes account for 60 percent of cigarette prices," a JT official said. "If the tax is raised further, it will do damage to smokers nationwide.
"We strongly oppose a tax increase that puts an excessively heavy burden on specific goods," the official said.
At present, a 250 yen pack of cigarettes includes 153 yen in taxes.