Revenue prefectures get from car taxes will plunge 18.4 billion yen next fiscal year because of a tax break for low-emission vehicles, the home affairs ministry said Wednesday.
The decline will be the result of the "greening of taxation," under which preferential rates for new low-emissions vehicles were introduced in 2002, according to the Public Management, Home Affairs, Posts and Telecommunications Ministry.
The number of low-emission vehicle registrations this year was higher than expected, while registrations of conventional vehicles subject to tax hikes were relatively low, the ministry said.
Revenue losses are expected to add up to 32.4 billion yen, while tax increases for conventional vehicles are expected to bring in 14 billion yen.
Although the system was successful in popularizing cleaner vehicles, the ministry said it will review it in a tax system revision expected for the next fiscal year because it is taking a significant bite out of local governments' funds.
Under the current system, new vehicles registered in fiscal 2003 that emit at least 75 percent less nitrogen oxide than the government standard are eligible for a 50 percent cut in the automobile tax for the next year, while diesel vehicles 11 years old or more and gasoline vehicles 13 years old or more are subject to a 10 percent tax hike.
The registration of new cleaner vehicles subject to the incentive in fiscal 2003 accounted for 46 percent of all registrations, according to a ministry estimate.