Carmakers in Japan announced the government that they plan to replace a tax for potential vehicle buyers that will defy restrictive production for a smaller car market.

Last month, the Liberal Democratic Party proposed a tiered tax to start in April 2017 in place of a current tax functioning in Japan regarding car purchases. The Japan Automobile Manufacturers Association had lobbied for the levy to not be implemented because buyers already pay a tax when they buy a vehicle.

The chairman of the association, Fumihiko Ike, stated that “We can’t take it anymore. Taxes are too high and if this continues, it will be hard for the auto industry to play a leading role in Japan’s economy.” The warning is the latest as carmakers worry about domestic sales after the tax gets applied.

According to the association, an average Japanese car owner pays five times as much as an U.S. motorist. Younger drivers in Japan do not look forward to owning a car and new registrations for people in Japan under the age of 40 has decreased a massive 46% since 2002.

Many of the carmakers in Japan have chosen to move car production overseas and expand in foreign markets, with the process increasing while the yen’s strength was up. However, under Prime Minister Shinzo Abe’s administration, the currency has weakened leading to a continuing trend of car manufacturing outside of Japan.

The tax plan created by the government involves four layers of taxes based on fuel efficiency, lower rates being applied to consumers of more eco-friendly cars. The current system in Japan asks consumers to pay for a national sales tax and a car purchase one upon acquisition. The sales taxes in Japan is planned to grow from 8% to 10% starting April 2017.


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