TOKYO: Japan's ruling party is considering scrapping a tax on car purchases to soften the impact of sales tax increases designed to help cover rising welfare costs, a senior lawmaker said on Monday.
The government's plan to double the sales tax to 10 percent by October 2015 has raised concerns among carmakers and other manufacturers that it will dampen private consumption, which accounts for roughly 60 percent of the economy.
The auto industry has been lobbying for the abolition of the 5 percent car acquisition tax, which is levied on top of the sales tax and is seen as `double taxation' on car purchases.
The abolition of the acquisition tax would translate into tax cuts worth about 200 billion yen ($2.55 billion).
Hirohisa Fujii, a former finance minister and the head of the ruling Democrats' tax commission, said the ruling party would debate steps to ease burdens on car and housing purchases when it draws up proposals for the year-end annual tax code revisions.
"Looking overseas, many countries impose double taxation on alcohol, tobaccos and gasoline. But not many countries do so on cars," Fujii told Reuters in an interview.
"I'm calling for the need to exempt car acquisition from taxes from the standpoint that double taxation must be avoided."
Fujii also said it was "worth considering" introducing in 2014 permanent tax exemption on profits from financial investments of up to 5 million yen to help stabilise the stock market. The current tax break expires at the end of 2013.
But the country's political calendar is uncertain after Prime Minister Yoshihiko Noda promised to call a general election "soon" in order to secure opposition support for passage of the sales tax bill last month.
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