There will be a new furusato nozei system. The restart of the system should be an opportunity to make widely known the original purpose of vitalizing local communities through goodwill donations.
Under the system, if a person donates money to a certain local government, that person is given a deduction from their residence tax or other payments, in an amount close to their contribution. It started in 2008, but one local government after another has collected huge sums of donations by offering luxurious gifts in exchange.
With the revision of the Local Tax Law, the internal affairs and communications minister will designate from June local governments that are eligible to use the system. Gifts will be limited to locally produced products whose prices are within 30 percent of the donations received.
This time, four municipalities -- Izumisano, Osaka Prefecture; Oyama, Shizuoka Prefecture; Miyaki, Saga Prefecture; and Koya, Wakayama Prefecture -- were excluded from the furusato nozei donation program. Even if a person donates money to an undesignated local government, that person will not receive preferential tax treatment.
Despite repeated demands by the Internal Affairs and Communications Ministry to voluntarily refrain from luxurious presents, they continued to provide such expensive gifts. Considering that their actions distorted the original purpose of the system, it is inevitable that the ministry excluded them from the system.
Izumisano received about 50 billion yen in donations in fiscal 2018, a 3.7-fold increase from the previous fiscal year. This figure is nearly the same scale as the city's roughly 51.6 billion yen initial general account budget.
Calling it a "closing campaign," Izumisano sent donors Amazon gift certificates for online shopping as well as return presents. Inviting donations in return for cash vouchers clearly goes beyond the original purpose of the system. Other local governments that have been deprived of tax revenue must feel strong dissatisfaction.
Exchange opinions on system
The Oyama town government collected about 25 billion yen in donations under the system in fiscal 2018. A newcomer, who called for a review of the gifts given in return as he said the gifts damaged the town's image, won the town's mayoral election in April. In May, the new mayor visited the ministry to apologize for the past practice, but the town was not designated as a local government that is eligible to use the system.
Because the ministry has shown a stern attitude toward these municipalities, excessive competition over return gifts is likely to subside.
Local governments should make efforts to promote the appeal of local communities while competing with each other over original policies and measures for regional development, thereby inviting donations from people who agree with these ideas. It is important to develop these efforts into such a healthy system.
Attention should be paid to the fact the excessive competition over gifts was prompted by battered local economies and fiscal difficulties due to population decreases. Rectifying disparities in the tax revenue in urban and rural areas is an ardent desire of local governments.
It is true that the furusato nozei system achieved certain results, diverting tax revenue from urban areas to rural ones. It is hoped that the system will be operated in a moderate fashion and effectively utilized.
Izumisano is said to oppose the ministry's decision and will consider taking steps in response. There is smoldering frustration among local governments without specialty items. The Tokyo metropolitan government, which is critical of the system itself, did not want the designation.
The ministry should continue to exchange opinions with local governments and further improve the system.
(From The Yomiuri Shimbun, May 16, 2019)
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