When it comes to car taxes, the most common are the ” automobile tax ” and ” environmental performance tax ,” which are determined by the vehicle model and fuel efficiency, and the “gasoline tax,” which is paid each time gasoline is used . The “mileage tax” is a new tax levied based on the actual distance traveled, regardless of the vehicle model or use. In other words, the tax varies depending on how much the vehicle is used. In recent years, car ownership has been declining due to factors such as young people’s shift away from cars and the spread of car sharing. Furthermore, the spread of fuel-efficient vehicles (hybrids and plug-in hybrids) and electric vehicles has reduced gasoline tax revenues. Road maintenance is expensive, so a mileage tax is being considered as a way to secure funding. While a specific implementation date has not yet been decided, the idea was also discussed at the 20th general meeting of the Government Tax System Research Council, held in October 2022. The Japan Automobile Manufacturers Association, Inc. (JAMA) is firmly opposed to a mileage tax.
What is mileage tax?
Mileage Tax Definition
Mileage tax is a tax levied according to the distance a vehicle travels. Unlike the traditional automobile tax and light vehicle tax, mileage tax is levied according to the amount of use of the vehicle, and is therefore attracting attention as a fairer tax system.
Difference from the previous automobile tax
The conventional automobile tax and light vehicle tax are determined by the vehicle’s engine displacement and model. However, fuel economy and mileage are not taken into consideration. Therefore, cars with good fuel economy or low mileage are subject to a lower tax burden than cars with large engine displacement or high mileage.
Background to the introduction of the mileage tax
There are three main factors behind the consideration of introducing a mileage tax:
- Declining gasoline tax revenue: In recent years, gasoline tax revenue has been declining due to the spread of fuel-efficient cars and electric vehicles. Securing financial resources for road construction and other projects has become an issue.
- Popularization of electric vehicles: Unlike gasoline-powered vehicles, electric vehicles do not emit exhaust gases while in operation, so they are exempt from or subject to reduced automobile and light vehicle taxes. Mileage tax is also being considered as a means of collecting taxes on electric vehicles.
- Ensuring fairness: Conventional automobile and light vehicle taxes are based on the vehicle’s engine displacement and model. However, fuel economy and mileage are not taken into account. The mileage tax is based on the amount of use of the vehicle, and is therefore expected to be a fairer tax system.
Reference: Cabinet Office
Background to the introduction
Declining gasoline tax revenue
Current situation of declining gasoline tax revenue
In recent years, gasoline tax revenues have been declining due to the spread of fuel-efficient cars and electric vehicles. Gasoline tax revenues for fiscal year 2022 are expected to be approximately 2.5 trillion yen, a decrease of approximately 200 billion yen from 10 years ago.
Impact of reduced gasoline tax revenue
Gasoline tax revenue plays an important role as a source of funds for road construction and traffic safety measures, etc. A decrease in gasoline tax revenue will affect the securing of these funds.
The spread of electric vehicles
Current status of electric vehicle adoption
In recent years, electric vehicles have become increasingly popular due to environmental concerns. The number of electric vehicles sold in fiscal year 2022 is expected to be approximately 60,000 units, a fourfold increase from five years ago.
Incentives for electric vehicles
Electric vehicles are exempt from or subject to reduced automobile and light vehicle taxes because they have a lower environmental impact.
Ensuring fairness
Issues with the conventional automobile tax and light vehicle tax
The conventional automobile tax and light vehicle tax are determined by the vehicle’s engine displacement and model. However, fuel economy and mileage are not taken into consideration. Therefore, cars with good fuel economy or low mileage are subject to a lower tax burden than cars with large engine displacement or high mileage.
Improving fairness through the introduction of a mileage tax
The mileage tax is expected to be a fairer tax system because it is levied according to the amount of use of the car.
How mileage tax works
Taxation method
There are two main methods of levying mileage tax:
- Odometer taxation: A method of taxing based on the odometer installed in a vehicle
- GPS Taxation: How to measure and tax mileage using GPS
Taxation using a distance meter
Odometer taxation is a method of taxing a vehicle based on the odometer installed on the vehicle. The odometer readings are checked during vehicle inspection to determine the tax amount.
GPS-based taxation
GPS-based taxation is a method of taxation that uses GPS to measure mileage. It allows for more accurate taxation because the vehicle’s location can be tracked at all times.
Advantages and disadvantages of each
| Taxation method | merit | Disadvantages |
|---|---|---|
| Taxation using a distance meter | ・Low implementation costs | There is a possibility of fraud |
| GPS-based taxation | Accurate taxation possible | ・High implementation costs |
Calculation of tax amount
The tax amount may be calculated based on factors other than mileage, such as the vehicle’s engine displacement and fuel economy.
Factors for calculating tax amount
- Mileage
- Engine displacement
- fuel efficiency
Example of tax calculation
A car with a mileage of 10,000 km, an engine displacement of 2000cc, and a fuel economy of 15km/L may be taxed as follows:
- Basic tax amount: 10,000 yen
- Additional tax based on engine displacement: 20,000 yen
- Tax deduction based on fuel efficiency: 10,000 yen
- Taxable amount: 20,000 yen
Handling of personal information
Introducing a mileage tax will raise issues regarding the handling of personal information, and the system must be designed with consideration for privacy protection.
Issues with handling personal information
- Recording driving history
- Invasion of privacy
Measures regarding the handling of personal information
- Data anonymization
- Strict security measures
Benefits of implementation
Securing road funding
Current state of road funding
The main source of funding for road construction and other projects comes from gasoline taxes. However, gasoline tax revenues are on the decline, making it necessary to secure new sources of funding.
Securing road funding through mileage taxes
A mileage tax can make up for the decline in gasoline tax revenue and secure funds for road maintenance and other projects.
Improving fairness
Issues with the conventional automobile tax and light vehicle tax
The conventional automobile tax and light vehicle tax are determined by the vehicle’s engine displacement and model. However, fuel economy and mileage are not taken into consideration. Therefore, cars with good fuel economy or low mileage are subject to a lower tax burden than cars with large engine displacement or high mileage.
Improving fairness through the introduction of a mileage tax
The mileage tax is expected to be a fairer tax system because it is levied according to the amount of use of the car.
Environmental Considerations
Current status of environmental issues
In recent years, environmental problems such as global warming have become more serious, and automobiles are one of the major causes of CO2 emissions.
Environmental considerations through mileage taxes
A mileage tax can encourage the spread of fuel-efficient cars and electric vehicles, thereby contributing to reducing the burden on the environment.
Disadvantages of implementation
Increased burden on local areas
The current situation of increasing burdens on local governments
In rural areas, where public transportation is often inadequate and cars are essential for daily life, the introduction of a mileage tax could significantly increase the burden on rural residents.
Measures to increase the burden on local areas
- Transfer of financial resources to local governments
- Tax reductions for diesel vehicles
Impact on the transportation industry
Current impact on the transportation industry
The introduction of a mileage tax could place a heavy burden on the transportation industry, and there are concerns that increased costs could lead to inflation and other effects.
Countermeasures for the impact on the transportation industry
- tax reduction measures
- Expanding support systems
Risk of personal information leakage
Risk of personal information leakage
Introducing a mileage tax will raise issues regarding the handling of personal information, and the system must be designed with consideration for privacy protection.
Countermeasures against the risk of personal information leaks
- Data anonymization
- Strict security measures
Introduction date
Government review status
The government is currently considering introducing a mileage tax. The specific timing of its introduction will be determined based on the progress of overcoming the issues.
Overcoming challenges
Introducing a mileage tax presents challenges, such as increased burdens on local governments, impacts on the transportation industry, and the risk of personal information leaks. It is important to take steps to overcome these challenges.
Overseas implementation examples
new zealand
New Zealand has had a mileage tax since 1999. The tax is based on the odometer reading on the car.
USA (Oregon)
The US (Oregon) introduced a mileage tax in 2015. The taxation method is based on GPS.
European countries
Several European countries have introduced mileage taxes, and the taxation method varies from country to country.
summary
A mileage tax is a tax system with many benefits, including securing road funding, improving fairness, and being environmentally friendly. However, there are also challenges that must be overcome before it can be introduced. The government must take steps to overcome these challenges and carefully consider the matter while gaining public understanding.
[2024] List of car tax types: “Automobile Tax,” “Weight Tax,” and “Environmental Performance Tax”
Ministry of Land, Infrastructure, Transport and Tourism
https://www.env.go.jp/policy/%E2%98%86shiryou2.pdf
Cabinet Office
