Supreme Court gave a decision June 30; it is violation of law for the state’s government
to have excluded the city of Izumi-sano, Osaka Prefecture,
from the scheme of hometown tax contribution. The central government policy had
come from the over-heated competitions among local governments surrounding the
tax system, in which donors can get gifts and enjoy tax alleviation. The Court
says that it is breach of the law that the government eliminated the city, justifying
its position on the ground of practices that prevailed before the revision.
THE TAX AND INCREASE SUBIDIES TO LOCAL GOVERNMENTS
scheme of hometown tax donation allows taxpayers to lessen their burden: for
instance, if you contribute 100 thousand Yen to any of the municipalities you
like in the country, you can enjoy a tax reduction on a portion of 98 thousand
Yen, though you pay \2,000. If a high income taxpayer donates one million Yen
to a municipality under this program, he/she can save tax payment on the
portion of 998 thousand Yen. Thus the city where the donor resides will lose
revenue. Meanwhile, a recipient local authority provides various souvenirs so
as to magnetize contributors, which triggered harsh competitions.
state government revised the Local Taxation Act in March, 2019, to curb catching
campaigns of municipalities, including gifting expensive products. From June
the same year the amended law came into operation and every local government
introduced the ‘designated system’ in which gifts should be local, original goods
that are less than 30% of the amount of donation in money terms.
addition, the Ministry of Internal Affairs and Communications issued a notice
that it would look into municipalities’ routines during a period of six months beginning
from November 2018 whether they had obtained donations, deviating the
regulations. In May next year four cities, including the city of Izumi-sano, were removed
from the scheme.
obligation to obey government’s announcement, but…
Izumi-sano city authority asked in June the ‘state-municipality conflict coordination
commission’ for examination. The commission advised the Ministry to review the decision,
saying that it may infringe the revised Local Taxation Acts. The ministry,
however, did not respect the commission’s guidance and the city authority sued
to the Osaka High Court in November, accusing the ministry. The high court
rejected the city’s legal action in January the next year. Then the Izumi-sano City appealed to the highest court in
February, which recently gave the state’s government a verdict to withdraw its policy.
The court’s ruling says that municipalities are not required to obey the state’s
announcement which lacks legal foundation. The Supreme Court’s judgment itself
is right, but the tax system itself has shortcomings as one of the judges
complained that the souvenirs given by Izumi-sano City
exceed a usual practice.
compete in catching donors
Ministry announced August 5 ‘investigation results on the current situation of
Hometown Tax Donation Program’ in the fiscal 2019. The total sum of donations
counts 487.5 billion Yen (512.7 billion Yen in the fiscal 2018), which is lower
than the previous year’s figure after seven years of absence. That seems an
outcome of the restriction imposed on gifting expensive items. Expenditure was
calculated as 227.5 billion Yen to campaign the program in order to invite
donors, which occupies 46.7%. Thus the net income of contributions is estimated
as only a half.
biggest winner of donors was the city of Izumi-sano,
which collected 18.5 billion Yen (49.7 billion Yen in the previous fiscal).
Municipalities which reduced tax revenues are found in the state-designated
large cities and special districts of metropolitan cities. The biggest
reduction of tax revenue is seen in Yokohama
City, which recorded 14.5
billion Yen. As for the special districts, the Setagaya Ward of Tokyo led by Mayor Hosaka
decreased by 4.9 billion yen. Some smaller local governments depend on this tax
program, but scrambles for tax money should be halted.
option is sales of local specialties by way of crowd-funding to gain revenue,
being a usual contribution. Frankly speaking, it is necessary to amend the tax
system, for instance, to increase the government’s allocation to distribute to