FEPC Position on the Nuclear Fuel Tax Imposed by Fukushima Prefecture

Reference 1-2

July 19, 2002
The Federation of Electric Power Companies

  1. The law was enacted without proper explanation to the taxpayer.

    • Despite the fact that the weight-based tax structure put forth by Fukushima prefecture represents an entirely new form of taxation, the new structure was suddenly proposed on April 25th of this year, and an explanation of the rationale for why the tax is necessary was offered on May 9th. The tax bill in question was sent to the assembly without a detailed explanation of the rationale for its existence being made. Furthermore, despite an urgent request that we be given an opportunity to present our views on the matter, the bill was ratified on July 5th without us even being given a chance to do so.

    • Therefore, because the Fukushima authorities did not fulfill their obligation to provide an adequate explanation to the party that must bear the burden of the nuclear fuel tax, there continues to be a wide gap between our views on this matter.

  2. There are problems with the new tax both in terms of the interpretation of the right of regional governments to impose taxes, and in terms of its compliance with the nation's constitution.

    • Although the Fukushima tax increase targets a specific company -- Tokyo Electric Power Company -- prevailing regulatory and political mechanisms make it extremely difficult for that company to express its opinions to regional governments. In addition, the failure to provide an explanation or logical rationale for the tax can be said to constitute either an abuse of the right of regional governments to impose taxes, or an abrogation of their duty to follow proper procedure, both of which contravene the spirit of the national constitution and are issues of serious concern. (Of particular concern are the new law's compliance with Article 14 [the equality principle], Article 29 [the right to own or hold property] and Article 31 [the right to due process].)

    • Furthermore, with the exception of holding discussions directly with the Minister of Public Management, Home Affairs, Posts and Telecommunications, the current system provides no mechanism by which taxpayers can defend themselves against the imposition or revision of such extralegal taxation. If such taxes can be unilaterally imposed on taxpayers who have no voting rights in the jurisdiction in question, or any right to speak out in its legislature, the taxpayer is effectively without representation. Such a situation fundamentally contravenes the principles of taxation defined in Article 84 of the constitution.

  3. The new tax not only imposes an unreasonable burden on the taxpayer, it also effectively amounts to double taxation.

    • Not only does the Fukushima tax more than double the tax rate from 7% to 16.5%, in comparison to the tax rates approved by Fukui and Niigata prefectures -- as well as the one approved by the Ishikawa Prefectural Assembly in June of this year (10%) -- it is an increase that it is entirely without precedent.

    • Furthermore, the implementation of a weight-based tax structure on top of the existing value-based tax structure effectively amounts to double taxation -- a clearly unreasonable state of affairs.

  4. The proposed uses of the increased nuclear fuel tax revenues are in many instances illogical.

    • The first step in ensuring the financial health of any regional government is for that government to manage its finances efficiently.
      Note: This is clearly stated in the Basic Policy on Structural Reforms for Social and Financial Management in the Future that was released by the Council on Fiscal and Economy Policy, and endorsed by the Cabinet.

    • For any increase in extralegal taxes, it is essential that there be a logical relationship between the item taxed and the use to which the revenues will be put.

    • However, the Fukushima government has stated that it needs the increased tax revenues to cover the administrative costs that would be incurred even if there were no nuclear power plants sited within the prefecture.
      Ex.: The Fukushima government has stated that the revenues will cover half the administrative costs of Fukushima Airport, including costs for civil engineering work, lighting maintenance and upkeep, and airport office security and fire control services.

    • In addition, they propose to fund a number of items entirely from nuclear fuel tax revenues in spite of the fact that a more rational allocation structure would draw only a portion of the needed funds from that source.

  5. The Law on Special Measures Concerning Promotion of the Development of Nuclear Power Sited Regions should be given precedence.

    • Road maintenance costs in the immediate vicinity of nuclear power facility sites account for the bulk of many host community revenue needs, and it was to meet such needs that the Law on Special Measures Concerning Promotion of the Development of Nuclear Power Sited Regions was enacted last April. By making full use of the support options offered under the law, it is believed that a considerable portion of Fukushima prefecture's revenue needs could be met.
    •  Fukui and Shimane prefectures have already begun implementing revitalization plans developed under this law.
    • Aomori, Miyagi, Ibaraki, Niigata, Aichi, and Kagoshima prefectures have already been certified as Nuclear Power Generating Facility Host Communities and are currently developing their own revitalization plans.

    • We therefore think that Fukushima should also quickly seek certification as a Nuclear Power Generating Facility Host Community under the law, and work to develop its own revitalization plan.

  6. The Fukushima tax is simply not in accord with the nation's overall economic policies.

    • The Promotion of Power-resources Development Tax, the Three Laws for Power development, the Atomic Energy Basic law, and the Law on Special Measures concerning Promotion of the Development of Nuclear Power Sited Regions all position nuclear power as one of the nation's most fundamental energy resources. In addition, the Outline for Promotion of Efforts to Prevent Global Warming make it clear that nuclear power has an important role to play in national efforts to reduce greenhouse gas production. If unprecedented tax increases like the one imposed by the Fukushima Prefectural Assembly were to spread to other areas in the nation, vastly increasing the tax burden on nuclear power generating facilities, it will not only stunt construction of new and expanded facilities, it will increase the possibility of a tax war breaking out in host communities throughout the country.

    • If such a tax war were to break out, it would have an extremely detrimental effect on the nation's energy policies, and the nuclear power development that is essential to our long-term energy security, and to our efforts to address global warming. Even the Ministry of Economy, Trade and Industry, which oversees energy policy, has expressed misgivings about the effect this would have on policy implementation.

    • In addition, we would like to point out that Article 6 of the Basic Law on Energy Policymaking enacted on June 14th states that "Regional public entities have a duty to follow the basic policy guidelines (on energy supply and demand issues), and to develop and implement policies that meet local needs while remaining in accord with policy implementation at the national level."

    • The Action Plan for Structural Economic Reform and Growth that was approved by the Cabinet in 1997 also states that the revitalization of industry through lower electricity costs is a policy priority. However, high taxes will put a significantly higher burden on producers, which -- if passed on to the market -- would seriously damage national policy efforts to achieve this goal. In conclusion, it is clear that the imposition of the tax will go against not only the nation's energy policies but also some of its most crucial economic policies.