2023-08-26 23:05:35
Last year, almost nine million taxpayers in the country of 125 million people took part in the system – more than at any time since it was introduced in 2008. The program was created to help rural areas increase their tax revenues due to the population decline in Japan and the exodus to the big cities.
The idea behind it was that city dwellers support their former home regions and receive something in return. The palette is immense: it ranges from local specialties and products from the region – such as seafood, fruit and vegetables – to a year’s supply of toilet paper, test drives in a Porsche, gift cards for hotels and restaurants and a one-day term as mayor.
Getty Images/Ladanifer Seafood is highly valued in return for donations
municipal competition
A certain part of the donations is tax-deductible, in order to calculate the exact amount, there are many online calculators available. “Furusato Nozei” thus became a popular way to reduce the tax burden. In the past fiscal year (March 2022 to March 2023), donations under this system totaled almost 1 trillion yen (about 6.3 billion euros).
Municipalities that are happy in this way are officially allowed to spend 30 percent of the additional tax revenue on gifts for donors. However, the plans for the program seem to have overlooked a key part – namely that it could lead to unhealthy competition for funds, as the Wall Street Journal (“WSJ”) recently reported.
AP/The Yomiuri Shimbun/Masamine Kawaguchi Also on sale: Dozens of packs of toilet paper
Got online shopping
Because the original idea that the money should benefit the home regions of the taxpayers no longer stands up to reality. Many people in Japan now equate the program with online shopping – the best gift options can be searched for on more than a dozen platforms, on blogs the gifts of the regions are evaluated.
Attachment to a certain place plays a very subordinate role. The Japanese Ministry of the Interior recently warned: The system was not intended as a shopping platform, but it would now look like it.
According to a report from the World Economic Forum (WEF) earlier this year, three of the five top fundraising locations in 2021 were cities in Hokkaido Prefecture, Japan’s second-largest island known for high-quality fish and seafood specialties. The city of Mombetsu in Hokkaido, which ranked number one nationwide, raised about 15.3 billion yen ($150 million) in donations.
joy and sorrow
Where there are winners, there are losers. The Tokyo district of Setagaya, with more than 900,000 inhabitants the most populous municipality in the prefecture, has been hit particularly hard. For the financial year ending in March 2024, the district expects a loss of almost EUR 65 million in tax revenue, the years before that did not look much better. According to the WEF, more than 377 million euros from the 23 districts of Tokyo flowed to other municipalities in the 2021 financial year.
APA/AFP/Philip Fong Setagaya resisted the reward system for a long time, but then had to give in
“This system is a mistake,” Setagaya chief administrator Nobuto Hosaka told WSJ. If losses continue to mount, the district could struggle to fund everyday services like road repairs and garbage collection. Setagaya also refused to hand out thank-you gifts for taxes for years. In view of the drop in income, they finally felt compelled to participate. Donations have doubled since then.
Sense of origin was lost
“It just so happens that people decide where to donate based on the gifts,” said Kazuya Misawa, a senior official of the port city of Numazu on Honshu Island. “So we thought about how we could differentiate ourselves from the other towns and communities.” The answer: a short lesson in the craft of welding, conducted at a local ironworks. As unusual as the offer may be, something else is in demand: 96-roll packs of toilet paper made in a local factory are among the most popular gifts, according to the official.
The World Economic Forum concluded its report on “Furusato Nozei” with the words: “It is time for Japan to return tax revenues to their original purpose. Both in terms of solving social problems, balancing public services and sustainably revitalizing communities.”
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