Japan may freeze aviation fuel tax increase

The transport ministry plans to seek a freeze on an aviation fuel tax hike slated for the fiscal year starting next April, sources have said.

The ministry will include a plan to keep the tax at the current levels in its tax system reform requests for fiscal 2027, judging that continued tax support for airlines is necessary amid soaring fuel prices reflecting turmoil in the Middle East.

Revenue from the tax, imposed on aviation fuel used for domestic flights and effectively passed on to passengers through airfares, finances airport improvements and noise control measures.

The statutory tax rate is ¥26,000 per kiloliter, except for flights to and from Okinawa Prefecture and remote islands.

The rate was cut to ¥9,000 in fiscal 2021 as part of measures to support airlines amid the COVID-19 pandemic.

The tax break has been gradually scaled back since fiscal 2022.

The rate has been ¥15,000 in fiscal 2025 and fiscal 2026, and is scheduled to rise to ¥18,000 in fiscal 2027. The ministry will seek to keep the rate at ¥15,000 for the upcoming fiscal year.

It will also request that the tax be kept at the current reduced level of ¥7,500 for fuel used for flights on Okinawa routes, lower than the statutory level of ¥13,000, and at ¥11,250 for remote islands, lower than ¥19,500.

To cope with soaring fuel prices, airlines are considering introducing fuel surcharges, now added to international airfares, also for domestic flights. With the measure likely to have a major impact on household finances, the ruling Liberal Democratic Party has asked the government for measures supporting airlines.