Nov. 30, 2009 (The Yomiuri Shimbun) -- A new environmental tax that the government may introduce in April to combat global warming is raising concerns in the electricity and gas industries due to expected hikes in prices for kerosene, coal and electricity.
As the new green tax is certain to greatly affect people's lives, the Environment Ministry's envisioned tax will be a topic of hot debate at the government's Tax Commission, which began working on the revision of fiscal 2010 tax reform Monday.
Given the dismal economic situation, an acceleration in the yen's rise and the deflationary trend, concerns are growing within industrial sectors that the new tax could stand in the way of business activities.
Shosuke Mori, chairman of the Federation of Electric Power Companies, said: "The 10 electric power companies need to take on a combined additional financial burden totaling as much as 430 billion yen. [If this extra expense is reflected in electricity charges], it would constitute an enormous burden on businesses and households without cars."
Mori, who also serves as president of Kansai Electric Power (OOTC:KAEPY) Co., made his comments during an informal meeting with Economy, Trade and Industry Minister Masayuki Naoshima.
Meanwhile, Norio Ichino, chairman of both the Japan Gas Association and Tokyo Gas Co. (OOTC:TKGSY) , criticized the government's move.
"It's a slipshod step since a new tax needs to be considered from the viewpoint of the whole tax system, including the consumption tax," he said.
The new environmental tax, the plan for which has already been submitted to the tax commission, is expected to generate about 2 trillion yen in taxes and is slated to be imposed on gasoline, coal and electricity. It is thought that the move will result in hikes in prices and charges.
According to a ministry estimate, the increased tax burdens, including those associated with electricity, gas and kerosene, will be offset by a decline in gasoline prices following the scrapping of the provisional tax rates on fossil fuels in April, meaning average households will have to fork out an increased net average of about 1,100 yen a year.
However, for households without cars, the additional burden is expected to be 4,240 yen, due to hikes in electricity and kerosene taxes. It is being predicted that the additional amount residents of each region are expected to cough up will differ.
According to the Petroleum Association of Japan, a standard, single-family house in Hokkaido, for instance, may have to pay an extra 4,000 yen per year, at the least, due to rising costs for kerosene alone.
On the other hand, the new tax may boost the popularity of solar power (OTCBB:SOPW) generation.
By installing solar panels, households could save on electricity and gas as well as sell excess power under the total purchase system now being studied by the government.
On weekends and holidays, a model house built by Sekisui Heim--a housing company belonging to the Sekisui Group--at a housing display park in Shinjuku Ward, Tokyo, is crowded with visitors keen to check out the building's solar panels.
"If the environmental tax is introduced, the merits of solar power generation will be enhanced," said a Sekisui Heim sales representative at the display park.
At the tax commission, those in favor of the green tax are set to emphasize the need for the new tax as an environmental policy under the administration of Prime Minister Yukio Hatoyama, who has pledged to reduce greenhouse gas emissions by 25 percent by 2020 from 1990 levels.
The main focus of discussions at the commission will be the timing of the new tax's introduction and how to deal with the financial burdens likely to affect general households and businesses in the form of hikes in electricity charges and fossil fuel prices.
