Japan petrochemical group welcomes naphtha tax-waiver extension

04 December 2009 15:17  [Source: ICIS news]

TOKYO (ICIS news)--The president of the Japan Petrochemical Industry Association (JPCA) has welcomed the decision made by the Japanese government late on 3 December to extend its two-year tax-exemption policy on naphtha, the association said on Friday.

“It is gratifying that the government’s Tax Commission has decided to extend the tax exemption on naphtha, and an equal footing with the world has been secured,” said JPCA president Kenji Fujiyoshi in a statement in Japanese.

“We would like to express our deepest gratitude to the Ministry of Economy, Trade and Industry (METI) and other people for their efforts,” he said.

During the meeting of the Tax Commission on the evening of 3 December, Parliamentary Finance Secretary Shinichiro Furumoto said the vice ministers of the related ministries, including METI, had agreed to extend the exemption of the petroleum and coal tax on imported and domestic naphtha for another two years.

The two-year exemption was due to end on 31 March 2010.

“From the viewpoints concerning measures against global warming, international competitiveness [of the petrochemical industry] and the effect of the tax reduction [on naphtha], which amounts to over yen (Y) 100bn ($1.1bn)...we need to continue to discuss and review this policy. But for this time around, we have decided to extend [the exemption],” Furumoto said.

The Tax Commission, under the new government led by the Democratic Party of Japan (DPJ), had been considering ending the exemption of two taxes related to naphtha – the coal and petroleum tax and the volatile oil tax – at the end of the 2009 fiscal year, which ends in March 2010, to cover losses in tax revenues from local public entities.

“[The Tax Commission] intends to extend the exemption of the volatile oil tax [on naphtha], but the final decision will be announced on 11 December,” a JPCA official said in a telephone interview in Japanese on Friday.

The coal and petroleum-tax exemption for naphtha currently totals approximately Y100bn per year, while the volatile-tax exemption for naphtha amounts to Y3,000bn a year, according to the JPCA.

The association had issued a statement on 19 November in which it demanded the government to keep the exemptions in place, partly because it said there are no countries in the world that impose a tax on naphtha.

“If [the Japanese government] taxed naphtha, Japan’s petrochemical industry would be devastated. The prices of the petrochemical feedstocks would be doubled, and downstream producers such as plastic manufacturers would suffer,” the JPCA official said.

“Cheap products from overseas would come in [to Japan] and domestic products would be unmarketable. As a result, operating rates of petrochemical plants would go down,” the official added.  

The Tax Commission is expected to announce its tax-reform policies for the next fiscal year in an official document in mid-December.

Details of the extension of the coal and petroleum-tax exemption and the final decision on the volatile-tax exemption are to be included in the announcement.

($1 =Y88.21)

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By: Tomomi Yokomura
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