Japan is preparing to impose a new tax on electric vehicles (EVs) and plug-in hybrid cars from May 2028, according to a draft reform proposal reported by Nikkei Asia.
Under the plan, the new levy would apply to non-commercial EVs and plug-in hybrids and be calculated according to vehicle weight.
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The funds raised would be earmarked for road maintenance.
The tax would be charged in addition to the existing tonnage tax that all vehicle owners pay at the time of mandatory annual inspections.
Japan’s ruling coalition and government officials are also moving to incorporate the measure into a wider overhaul of the tax system.
The country’s current framework directs both the tonnage tax and fuel tax revenues towards the upkeep of roads.
However, as EVs do not consume petrol and are generally heavier than conventional petrol-powered cars, policymakers are concerned that a growing shift to battery-powered vehicles could erode funding for road infrastructure, even as heavier vehicles potentially increase wear on road surfaces.
The draft notes that the share of imported EVs in the domestic market is also rising.
These imported models are typically heavier than Japanese-made vehicles, which the proposed tax is expected to capture, potentially bolstering overall tax receipts.
The EV levy will be bundled into the government’s broader tax reform package for the next fiscal year, with the full set of revisions to be finalised and put to a vote in parliament.
The exact rate of the new tax has not yet been set and will be determined later, using benchmarks such as the average level of gasoline tax paid by owners of internal combustion engine vehicles.
According to the draft, the tax imposed on plug-in hybrids is expected to be set at around half the level applied to fully electric vehicles, reflecting the fact that plug-in hybrid owners still pay some fuel tax.
Newly registered EVs and plug-in hybrids would not be subject to the tax at their first inspection.
Decisions on how commercial EVs will be taxed are scheduled to be taken as early as the end of next year.
Alongside the new levy, lawmakers intend to extend existing incentives for low-emission vehicles.
A reduction on the motor vehicle tonnage tax for eligible “green” cars is set to be prolonged by two years, up to April 2028.
In addition, legislators are working on a two-year suspension of the environmental performance tax collected by local authorities, as part of efforts to support the automotive sector.
Any shortfall in local tax income would be offset with funding from the central government.
