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Wednesday, October 19, 2016

The Furusato Tax System - Municipalities Vie for Money

ふるさと納税

It's no secret that Japan's population is declining, and that this is causing an emptying out of the countryside to the benefit of the big cities.

Fruit assortment a thank you gift for Japan's Furusato Taxation System.
Fruit assortment - a Furusato Nozei System thank you gift from a rural municipality
A trip to Sado Island a couple of years ago brought home to me the realities of this demographic change. The formerly bustling main street of what was called Ryotsu City when I lived there back in the late 1980s was almost completely dead, with more than half the stores boarded up.

Since 2008, Japan has been trying to mend the economic inequalities that are caused by this rural outflux. The "Hometown Tax Payment System" (Furusato Nozei) lets those living in cities pay up to 20% of their Metropolitan Ward and Municipal Inhabitant Tax on Individuals (kojin juminzei) to a rural local body, in exchange for which the payer receives a "thank you gift" (henreihin), typically of local produce.

Crab offered as a thank you gift for the Furusato Nouzei System in Japan.

The system is popular and the various localities throughout Japan put their all into it, offering a huge range of local-made and -grown products. An industry has grown around it as localities compete with each other to offer attractive gifts, with numerous ranking websites to help the taxpayer-cum-consumer choose which region to support.

But now the urban wards and municipalities are feeling it. This year, the Tokyo metropolis has lost 26.16 billion yen (about USD 250 million) to the localities because of this system. Suginami ward, for example, in west Tokyo, has lost 730 million yen (about USD 7 million),making for 1% of lost income.

Peaches - a thank you gift for the Hometown Taxation System.

The Tokyo wards are fighting back, and today Nakano ward announced that it will also be joining the growing ranks of Tokyo metropolitan wards that offer their own thank you gifts for the payment of individual resident taxes.

The trouble is, urban areas are hard pressed to compete with the beautifully presented produce that forms the thank you gifts sent to urban benefactors, such as Niigata rice or Aomori apples or Kumamoto pompeiyu.

Sumida Ward has been offering lunch coupons for the Tokyo Skytree observation deck since 2014, Shinagawa ward has been offering postcard sets (yes, really) of famous Shinagawa places, but Nakano ward is looking into making the most of its existing relationships with rural municipalities and offering produce from there, like Hokkaido rice or sake from Fukushima prefecture. The cost of running the Furusato system is estimated to be about 30% of the tax contributions received.

Rice as a thank you gift for the Hometown Taxation System.

It's an uphill struggle for everyone wanting money from a shrinking taxpayer base, and Japan's bureaucracies are now having to look more and more to commercial PR techniques in wooing the taxpayer.


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