Tax deductible donations to municipal governments under the furusato nozei (hometown tax) payment scheme in fiscal 2016 hit a record ¥284.4 billion, the government said Tuesday.
Donations were up 1.7-fold in the year ended March 31 from fiscal 2015 as simplified online procedures encouraged more people to make use of the program, the internal affairs ministry said.
The program, launched in fiscal 2008, allows people to donate to their hometowns or any other municipality of their choice and receive tax cuts. In practice, most users donate to local governments other than their hometowns, thanks to the gift incentives that are offered.
The scheme was originally introduced to ease the disparity in tax revenues between urban and rural areas, and many local governments send gifts such as locally produced food items to express gratitude to the donors.
The rate of increase in donations in the last fiscal year, however, fell from the 4.3-fold gain of fiscal 2015, when the maximum allowable tax-deductible amount of donations was doubled, according to the ministry.
It could further slow in the current fiscal year as the ministry has been calling on local governments to refrain from offering expensive gift items amid concerns that only financially viable municipalities will be able to lure donors, which would be contrary to the aim of the program — alleviating tax revenue disparities.
While many municipalities send donors local produce such as meat, vegetables and seafood in return, some offer vouchers and personal computers, which can be resold for cash.
The number of donations in fiscal 2016 totaled 12.7 million, up 1.8-fold from the previous year.
For the second straight year the city of Miyakonojo, Miyazaki Prefecture, was the biggest recipient of donations, raking in ¥7.33 billion. It offered items such as locally produced beef and shochu spirits as incentives.
Municipalities hit by natural disasters tend to see the number of donations soar.
The city of Kumamoto came in sixth, drawing a little less than ¥3.7 billion, after it was rocked by powerful earthquakes in April last year.
Local governments offering expensive gifts or a wide array of local produce in return drew sizable amounts of donations, with the city of Ina, Nagano Prefecture, ranking second, followed by Yaizu, Shizuoka Prefecture, Tsuno, Miyazaki Prefecture, and Kamimine, Saga Prefecture.
Since April, the ministry has demanded reviews of practices by some local authorities offering items worth over 30 percent of each donation or vouchers and home appliances that can be converted into cash.
In response, about 90 percent of around 200 prefectural or municipal governments who rank among the winners for the amount of money received said they intend to alter their practices.
Under the hometown tax payment scheme, donors see the amount they donated, minus ¥2,000, deducted from their national and municipal income taxes.
That means donors gain financially if they receive any item with a cash value of more than ¥2,000.