Proposal to triple taxes on K-cars raises concerns among rural drivers
“There are no supermarkets, drugstores or other shops selling necessities within walking distance of my home,” says Kentaro Hayami, a 32-year-old salaryman living in a regional city of 400,000. “This is why a ‘kei jidosha’ (minicar), with its low costs of ownership and operation, is such a necessity.”
Hayami had previously lived in Tokyo but was one of those who performed a “U-turn” and went back to his rural roots. He explains to Weekly Playboy (Dec 9) how inconvenient his life there would be were it not for the minicar he drives.
“Without it, commuting to work would become troublesome, and I’d have no access to leisure either,” Hayami adds.
Japan has approximately 20 million minicars on the road. The main reason is they enjoy favorable tax treatment that has made them the “legs of the citizens.” The ‘kei-jidosha’ system originally applied to cars with engine displacement of under 360 cubic centimeters. In 1976 the law was revised to boost displacement to 550cc and in 1990, it was increased again to 660cc.
In addition to engine limitations, minicar models are currently required to be 3.4 meters or less in body length and 1.48 meters in width. They are typically exempted from parking regulations.
Yet within these limitations, manufacturers such as Daihatsu, Suzuki and Mitsubishi Motors have succeeded in revolutionizing small car technology, creating sporty-looking models that seat four adults in comfort and provide lively performance, enabling drivers to enjoy the pleasures of ownership while at the same time consuming less fuel and generating less pollution.
Once regarded as a “gaman-kuruma” that owners tolerated because they couldn’t afford anything better, they are more popular than ever: according to industry statistics, of the 3.82 million new passenger cars sold in Japan from January through October of this year, K-cars accounted for 1.42 million—a 37.1% share.
Now the question is, will this popularity come screeching to a halt? The Ministry of Internal Affairs and Communications, in a report made public earlier in November, proposed a new tax system that would make minicar owners pay their “fair share” of vehicle taxes.
A draft of the proposal calls for abolition of the current one-time vehicle acquisition tax of 40,500 yen on minicars, replacing it instead with a consumption tax—slated to rise to 10% in 2015, at which time it would be approximately 150,000 yen per vehicle. In addition, the annual tax on minicars, currently just 7,200 yen per year, would rise more than threefold to 24,500 yen, thereby narrowing the current tax gap between compact cars with displacements under one liter (whose owners pay 29,500 yen per year) and the minicars.
The bottom line, if the tax is enacted, would mean an overall tax increase of approximately 200,000 yen over the 10-year life of a vehicle, and greatly impacting on people in rural areas, small business owners and other individuals who can least afford it.
In rural areas with limited public transportation, moreover, it’s quite common to see households with two or even three minicars, which means they would be saddled with additional taxes of 50,000 yen or more per year. And needless to say, this would come at a time that the higher salaries envisaged by Abenomics are still just a pie in the sky.
This, the magazine claims, is yet another case of the strong bullying the weak.
Should the new tax system be rammed through, moreover, supermarkets, restaurants and other businesses that depend on the minicar owners for their patronage will also feel the pinch.
On Nov 15, Akio Toyoda, chairman of the Japan Automobile Manufacturers Association, voiced the organization’s opposition to the higher tax on minicars. METI Minister Toshimitsu Mogi responded that he “understood” that minicars were the “legs of regional areas” and that owners should be spared an “undue burden.”
But if the ruling coalition intends Mogi’s remark to be more than simple lip service, the magazine opines, a “smart decision” is called for to keep minicars affordable.