The latest judicial ruling is a warning against overheated competition among local governments over compensatory gifts.
The sentence concerns a lawsuit filed by the city government of Izumisano, Osaka Prefecture, demanding the revocation of a decision by the Internal Affairs and Communications Ministry to remove it from the furusato nozei system, a tax-deductible donation program. The Osaka High Court has rejected the municipality's demand. The city government intends to appeal the case to the Supreme Court.
The municipal government collected a massive amount of donations through the offer of luxury gifts in return. In June last year, the ministry enforced a law that set standards for such gifts, stipulating that they be limited to "local products whose prices are 30 percent or lower of the amount of donations involved." The ministry cited the efforts made up to that time as a reason for its decision and excluded the municipality from the system.
The point of contention in the trial was the appropriateness of the ministry's action in that respect. The city government insisted, among other things, that the decision to remove it from the system with the past performance as a reason effectively constitutes retroactive application of the law and is therefore unacceptable.
In response, the latest ruling stated that the law had been introduced to normalize the furusato nozei system and concluded there was nothing wrong with considering facts related to the past for that purpose.
The judgment also stated that the internal affairs and communications minister has the authority to decide the criteria for participation in the system and specify local governments that should be covered by the system. This can be described as defining the minister's discretionary power from a broader point of view.
However, the Central and Local Government Dispute Management Council, a third-party organ at the ministry, took a skeptical view of the decision to remove the municipality based on its activities prior to the enforcement of the law.
At the time of the furusato nozei system's start, the ministry did not sufficiently envision competition over compensatory gifts. It later issued a nonbinding notice calling on local governments to show restraint regarding compensatory presents.
Although the ministry expected local governments to exercise restraint in this respect, there is no denying that its actions came too late.
The latest suit served as another reminder of the system's initial objective -- supporting local governments through goodwill donations.
The system prescribes that if someone makes a donation to a local government outside his or her place of residence, the donor is entitled to deductions from their residential or other taxes nearly equal to the sum of the donation. Meanwhile, local governments are expected to use donations for projects in their areas, as well as distinctive policy measures.
The Izumisano city government has offered a large number of gift coupons unrelated to its region. It used the precious donations for such purposes as expenditures for procuring compensatory gifts. It is obvious to anyone that such an approach deviates from the system's objective.
In soliciting donations under the system, local governments need to emphasize the problems facing their regions and their own policy measures, striving to gain donors' support for their efforts.
The city government in Kaga, Ishikawa Prefecture, has used donations for facilities in which children come in contact with technology. Local governments in areas hit by the Kumamoto Earthquake or typhoons have called for donations aimed at supporting their restoration efforts. It is advisable to expand efforts conducive to regional revitalization in a manner suited to the original purpose of the system.
-- This article appeared in the print version of The Yomiuri Shimbun on Feb. 3, 2020.
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