There is a growing trend to allow people to pay taxes to local governments using mobile payment apps. Local governments want to increase the payment rate for taxes such as on automobiles and fixed assets, while technology companies want to promote their services.
Usually, people have to bring a tax payment notice to a financial institution or convenience store to pay their taxes.
For local governments that allow the new payment system, the notice will include a bar code printed on paper. Reading the bar code with a smartphone camera, a payment page opens on the phone and the payment can be completed using a smartphone payment app.
Examples of such apps are PayPay and Line Pay, with which users have registered their credit card, bank account and other information.
There are no additional fees to pay with such apps and users may sometimes receive rebates from the companies operating the apps based on the amount of the payment.
--Diversified lifestyles
In September 2019, the number of local governments accepting the PayPay service was about 200, but this has grown to more than 400 in less than a year.
The Osaka city government also accepts several cashless payment systems in addition to PayPay and Line Pay.
"Taxpayers' lifestyles are becoming more diverse and we need to create an environment that makes it easier for them to pay their taxes," a city tax collection division official said.
How effective the system will be in practice has yet to be verified, but the official said that it aims to increase the tax payment rate by increasing the number of tax payment methods.
The Tokyo metropolitan government started accepting payments via PayPay and Line Pay in June, when it sends out notices for each fiscal year's first payment of levies such as the fixed assets tax. The move was made partly due to the fact that the spread of the novel coronavirus has brought attention to avoiding in-person interactions.
"We were receiving inquiries asking if people could use smartphone payments," a Tokyo government official said.
--40 trillion yen. market
Technology companies are also seeing the benefits.
The Line Pay service is accepted by about 400 local governments. The number of times the system was used to pay taxes in April was 1.5 times higher than in March, partly due to the spread of the novel coronavirus that caused people to refrain from going out.
"Local taxes are a huge 40 trillion yen market," a Line Pay official said. "If people can see how convenient it is to use, it will lead to increased use for payments at stores."
Many of the users of smartphone payment apps are young people. How to increase their use with the middle-aged and older generations, who pay taxes on many occasions, will be a major challenge in the future.
The central government plans to promote the digitization of administrative services, but there are no plans to support smartphone payments for tax payments at this time, according to an official of the National Tax Agency. However, if payment apps become widely accepted among local governments, it may influence the central government's decision.
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