Honda showroom-1

Japan may see a new car levy coming in to replace the current vehicle acquisition tax, according to a Bloomberg report. The plan by the Liberal Democratic Party – which is being submitted today to the ruling party’s special tax investigative committee – proposes to have four grades of tax rates for regular passenger vehicles sold in the country.

The rates, which range from zero to 3%, will be based on the fuel efficiency of vehicles, the news agency said. Minicars and commercial vehicles will be levied from zero to 2%, while electric vehicles, fuel-cell vehicles and plug-in hybrids will be exempted from tax.

The new levy is similar to the current vehicle acquisition tax system, which offers lower tax rates for green vehicles. Japan’s automotive industry has campaigned for scrapping the car acquisition tax amidst plans by the government to increase the sales tax to 10% in 2017 – a decline in demand for vehicles came about when the tax rate was raised to 8% last year.

Revenue obtained from the new tax would be about 89 billion yen ($725 million), according to information obtained by Bloomberg. If it goes through, the new levy will begin in April 2017, which is the date set by the government for the proposed tax rate increase.