The idea of abolishing the automobile acquisition and weight taxes and instead using the environment tax as a revenue source for municipalities has emerged within the Liberal Democratic Party government, sources said.
Whether to scrap the levies, two important revenue streams for local governments, is a key issue in tax reforms under discussion for fiscal 2013, which starts April 1.
The Ministry of Economy, Trade and Industry and the auto sector are pushing for the abolition of the two local taxes, but the Internal Affairs and Communications Minister and local governments want them left in place.
The LDP is divided over whether to abolish the taxes. Revenue from the auto purchase levy totals around ¥200 billion a year.
New Komeito is also calling for an end to the acquisition tax because of the coming rise in the consumption tax.