The total amount of money collected under the furusato nozei (hometown tax donation program) in fiscal 2018 grew some 40 percent from the previous year to about ¥512.7 billion, hitting a record high for the sixth straight year, the Internal Affairs Ministry said Friday.
The growth was the steepest on record in terms of amount, as some local governments collected huge amounts of donations by offering generous return gifts.
The combined amount of donations collected by four municipalities that were excluded from a new donation system launched in June accounted for over 20 percent of the total amount for fiscal 2018, which ended in March.
Under the system, people can make donations to local governments of their choice. In return, the amounts of donations minus ¥2,000 are deducted from their income and residential taxes.
After some municipalities competed to increase the amount of donations received by offering expensive gifts in return, the ministry decided to limit such gifts to local products worth up to 30 percent of the value of donations and exclude local governments from the system if they did not comply with the rule.
At the ministry’s request, most municipalities had reviewed their return gifts by last November. But the ministry excluded the four municipalities that did not follow the rules.
One of the municipalities was the city of Izumisano in Osaka Prefecture.
In fiscal 2018 the city collected ¥49.75 billion, the highest amount among local governments, after offering gift cards that could be used at Amazon Japan G.K.’s online shopping site as well as the return gifts.
The other three noncompliant municipalities followed Izumisano on the list of top earners.
The town of Oyama in Shizuoka Prefecture came in second, collecting ¥25 billion, followed by the town of Koya in Wakayama Prefecture with ¥19.6 billion, and the town of Miyaki in Saga Prefecture with ¥16.8 billion.
The ministry also said residential tax revenue in fiscal 2019 declined ¥326.4 billion year on year due to donations under the system, led by large cities with many donors. The size of the drop grew 30 percent from the previous year.
By municipality, Yokohama suffered the largest decline, at ¥13.6 billion, followed by Nagoya with ¥8.09 billion and Osaka, with ¥7.4 billion.
Tax revenues fell by ¥5.6 billion in Kawasaki and ¥5.3 billion in Setagaya Ward, Tokyo.
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