This fiscal year the government is expected to collect about 5.78 trillion yen in revenues from six different taxes paid by automobile and road users. Because these revenues are legally earmarked for road improvement, however, the government cannot use the money for other purposes. This rigidity has become a major roadblock in state finance.

Prime Minister Junichiro Koizumi recently instructed that the tax revenues in question should be lumped together with general-account revenues. This would mean a greater pool of tax revenues from which the government could flexibly draw, and possibly less reliance on the issuance of government bonds to make up for tax revenue shortfalls. But the government must make sensible use of the newly available revenues to win the understanding of taxpayers who own motor vehicles and use the roads as well as the general public.

Mr. Koizumi’s decision amounts to a frontal attack on the group of “road tribe” politicians — lawmakers who have served as lobbyists for road-related construction industries. They have wielded strong influence on how revenues from the six taxes are used. For many years, these tax revenues have been regarded as a kind of “sanctuary” for road tribe politicians, most of whom belong to the ruling Liberal Democratic Party. The tax revenues have often provided “pork barrel” funding for construction industries, which then have funneled part of the money back to lawmakers as political contributions. This mechanism has resulted in the construction of highways whose economic feasibility was questionable, to say the least.

Mr. Koizumi was able to smash this sanctuary because influential road tribe politicians, including former Lower House Speaker Tamisuke Watanuki, left the LDP over the controversy involving postal reform shortly before the Sept. 11 general elections, and because many antireform politicians failed to be re-elected. It is symbolic that former National Land, Infrastructure and Transport Minister Nobuteru Ishihara, a main force for privatization of the Japan Highway Public Corp., has become head of the LDP’s Research Commission on Highways, the bastion of road-tribe politicians. The review of the taxes and revenues in question had been expected to start next year. But following Mr. Koizumi’s decision, it will be moved up.

Taxes to collect money for road improvement were introduced in 1954 when Japan was lagging behind in highway construction. Later, surcharges were added to tax rates during the first oil crisis (1974) and are still in force. The taxes consist of three national plus three local ones. The former is expected to raise 3.56 trillion yen in fiscal 2005; the latter, 2.22 trillion yen.

Of the three national taxes, the one producing the most revenue — an estimated 2.91 trillion yen this year — is the gasoline tax. The biggest revenue generator among the local taxes is the light-oil tax, expected to bring in 1.05 trillion yen.

Because spending for public works has been slashed over the past several years, the budget for road improvements has shrunk. One result has been a surplus in revenues earmarked for road improvement. Part of the money is now being used to construct a series of multilevel crossings, bury electric cables underground along roads and make up for deficits incurred by the former Honshu-Shikoku Bridge Authority. With the bridge authority-related outlay ending in fiscal 2006, a surplus of more than 400 billion yen is expected in fiscal 2007.

As the Finance Ministry and other government ministries start discussing how the tax revenues set aside for road improvement should be used as a general revenue source, they must overcome several hurdles. One is how to answer possible complaints from people who pay the taxes in question. If the revenues are changed into a general-revenue source, some taxpayers may feel they are being doubly taxed compared with people who do not have to pay such taxes.

Another problem is how to deal with existing tax surcharges. For example, the tax rate on gasoline is 48.6 yen per liter, with the surcharge accounting for half of that. Due to the surcharge, the tax rate for automobile weight is 2.5 times the original rate. Automobile users may argue that if the revenues are not used for the original purpose of road improvement, then the surcharges, at least, should be abolished. Moreover, might an end to the gasoline tax surcharge lead to increased consumption of gasoline, thus worsening global warming?

Too hasty a decision on how to use the revenues should be avoided. Various options, including using the revenues to introduce new environment-friendly mass transit systems (such as new-generation streetcars) and to improve the natural environment while securing the minimum funding necessary for road improvements, should be carefully considered.

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