Abe tax plan hits stiff LDP opposition

Proposal to use road levy funds for general spending called 'national fraud'

by Hiroko Nakata

The Cabinet’s plan to use road-related tax revenues for general expenditures ran into strong opposition Wednesday from members of the ruling Liberal Democratic Party, which may force Prime Minister Shinzo Abe to revise his key fiscal reform.

Two-thirds of some 60 members who gathered at the LDP’s headquarters to listen to the proposal by Chief Cabinet Secretary Yasuhisa Shiozaki expressed opposition to the Cabinet’s plan to begin making legal changes in fiscal 2008 to allow revenues from road-related taxes to be used for general expenditures. At present, such revenues can only be used for road construction.

One of Abe’s budget priorities is to cap spending on roads in the face of a ballooning public debt.

But politicians from rural electoral districts and heads of local governments, many of whom are closely tied to the construction industry, oppose the cuts.

The auto industry is also against the plan, arguing for lower road-related taxes, particularly levies on gasoline.

“If Abe’s government really wants to reduce disparity between rural areas and city centers, it should carry out road construction,” Seishiro Eto, a veteran Lower House lawmaker, told reporters.

“It is almost a national fraud,” said Kohei Tamura, an Upper House lawmaker from Kochi Prefecture, referring to the Cabinet’s tax reform plan.

Shoichi Nakagawa, LDP policy chief, will discuss the plan with ministers to ensure the party members’ concerns are addressed. The Cabinet hopes to settle the issue before Abe leaves for the East Asia Summit in the Philippines on Friday.

Home buyers’ breaks?

Kyodo News The tax panel of the ruling Liberal Democratic Party said Tuesday it will call for an extension of the current income tax credits for people who suffer a capital loss when selling their homes to buy a new one. The extension will be included in the party’s tax reform proposals for fiscal 2007, LDP lawmakers said.

The LDP’s Research Commission on the Tax System will also call for tax breaks for companies that adopt measures to support child care for their employees.

The tax panel decided to drop a request to expand tax breaks for families with children.

Meanwhile, the panel will debate whether the corporate tax should be lowered from the current level of about 40 percent in its tax reform proposals for fiscal 2008 or later.

The prime minister’s tax advisory panel said on Dec. 1 it will study the issues from the standpoint of their medium- and long-term effect on revenue.

The LDP tax panel is likely to debate longer-term issues, including corporate and consumption taxes, with a view to ensuring stable revenue for the nation’s pension system.

Other issues, including tax breaks on capital gains from stock sales and dividend income, are also likely to come up. The Tax Commission, an advisory panel to Prime Minister Shinzo Abe, recommended on Dec. 1 in its tax reform proposal for fiscal 2007 that breaks on capital gains be terminated in the next fiscal year, although it said steps should be taken to minimize the impact on the stock market.