Reform of hometown tax donation system spurs revamp of gift programs across Japan


Governments across Japan are starting new gift programs in the wake of the central government’s decision to “normalize” the hometown tax donation system.

The furusato nōzei system, as it is known, was introduced in fiscal 2008 to enable citizens to donate money to prefectures and municipalities they want to support in exchange for tax deductions. It was originally aimed at helping financially strapped governments struggling with depopulation and other issues by playing on nostalgia for places where people feel personally connected.

Donations in fiscal 2018 came to about ¥512.7 billion, setting a new high for the sixth year in a row.

Over the years, local governments started to offer expensive gifts in return for donations. In fiscal 2018, which ended in March, the city of Izumisano in Osaka Prefecture received some ¥49.7 billion in donations, the most of any local government, after it added gift certificates to return gifts to donors. Donations to Izumisano and three other local governments that also offered expensive return gifts accounted for more than 20 percent of the total amount in the year.

To correct the excessive competition for donations, the Internal Affairs and Communications Ministry, which oversees the system, repeatedly called on governments to stop offering expensive gifts. But the calls largley fell on deaf ears.

In June, therefore, the ministry introduced a new system, under which gifts must be locally produced products with a value below 30 percent of the donated amount. Izumisano and the three other municipalities have been barred from the new donation system because they continued offering expensive gifts.

The new system has prompted many governments to turn away from the practice of sending donors such premium products as meat, rice and crabs in favor of programs designed for the original purpose: supporting local governments.

For example, a group of about 70 governments launched a joint campaign to offer return gifts matching their specialties, from excursions for dinosaur fossils in Fukui Prefecture to hot pot events known as imoni-kai in the city of Yamagata.

The campaign is aimed at encouraging donors to visit the municipalities and explore the local attractions. It helps to raise the number of people maintaining links with the communities they are supporting.

More and more local governments are resorting to crowdfunding, the practice of raising small amounts of money over the internet to finance programs to address issues they face, such as child poverty and support for young entrepreneurs.

In fiscal 2018, 204, or 11.4 percent, of all governments said they had engaged in crowdfunding, the ministry said.

Use of donations under the hometown tax donation system to fund disaster recovery is also widely practiced.

“The new system will likely prompt local governments to work out various innovative programs to revitalize local communities,” said an official at Trustbank Inc., which runs Furusato Choice, an intermediary website for hometown tax donations.

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