The national government on Friday refused approval for Yokohama’s plan to impose a tax on horse racing bets organized by the quasi-public Japan Racing Association.

The Public Management, Home Affairs, Posts and Telecommunications Ministry said the tax — the first targeting the JRA — could hamper national economic policy. Yokohama Mayor Hidenobu Takahide said he plans to ask an arbitration committee to review the decision.

With the implementation of a law to expand local autonomy last year, municipalities have been given greater freedom to impose taxes. But the latest decision suggests they still face difficulties in acting independently when it affects state coffers.

The Yokohama city assembly approved an ordinance in December imposing a 5 percent tax on ticket sales at two off-track betting booths, located in central Yokohama. Yokohama — known as the birthplace of modern horse racing in Japan — estimates the tax would net 1 billion yen annually.

The 92-seat assembly backed the administration’s plan, feeling the public resentment over the litter of tickets and cigarette butts around the booths would lend wide support for the tax.

The JRA argued that as a quasi-public organization, affiliated with the farm ministry, it should not be taxed. The association is exempt from corporate tax, instead paying the state 10 percent of its annual income, which mainly comprises ticket sales.

Ticket sales reached 3.6 trillion yen in the business year ending December 1999.

The JRA, which has 29 betting booths across Japan, paid 402 billion yen to the central government in 1999 , when it held 36 series of races over 285 days in 10 cities.

Yokohama argues it is illogical for JRA, which does not necessarily improve the living conditions for local residents, to remain exempt from tax when it is making profits. The public management ministry expressed its displeasure over the Yokohama tax plan even before its local finance council officially began to debate the proposal. But Mayor Takahide openly defied the ministry’s position, saying that the city is “determined” to introduce the new tax. Toranosuke Katayama, chief of the public management ministry, decided to dismiss Yokohama’s request after receiving a report from the council.

Taxes such as those proposed by Yokohama could affect the levy the JRA is required to pay the state, and thus run counter to the legal provision that allows municipalities to impose new taxes “on condition that they do not hamper economic measures of the national government,” ministry officials said.

The officials also noted that if Yokohama’s tax plan was approved, other local governments could impose similar levies on the JRA.

The arbitration committee is an independent body of lawyers and academics handling disputes between the national and local governments. If Yokohama is dissatisfied with its decision, it can file a lawsuit with a high court.

City officials said they cannot accept the government decision, claiming it lacks the perspective of local administration. “We will pursue whatever means left to us (to fight the ministry’s rejection),” Mayor Takahide said.

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