The Supreme Court overturned on Tuesday a lower court ruling in favor of the central government's decision to remove a western Japan city from a donation scheme after the municipality attracted contributions by offering gifts valued above a set level in return.
In its ruling, handed down by presiding Justice Yuko Miyazaki, the top court said that a portion of the internal affairs ministry's notice on participation guidelines saying past ways to solicit donations are taken into account is "unconstitutional and invalid."
Specifically, the part of the notice "inflicts lasting and serious damage to local governments as it indicates that not all municipalities would be included in the new system" based on their past donation-gathering methods, the court pointed out, adding that it was hard to comprehend that the law had entrusted the internal affairs minister to establish the rule.
Still, the court said it was understandable for the government to judge that the city's return gifts in the past were beyond a reasonable level.
The Internal Affairs and Communications Ministry is expected to soon rescind its ban on the participation of Izumisano in Osaka Prefecture in the furusato nōzei (hometown tax donation) system, after it excluded the city and three towns in Shizuoka, Wakayama and Saga prefectures from the program in May last year, ministry sources said.
The program, originally launched in 2008, allows individuals to make tax-deductible donations to their hometowns or other municipalities, with the aim of easing the tax revenue disparity between urban and rural areas.
Izumisano, the top donation recipient among all municipalities in fiscal 2018, garnered nearly ¥50 billion ($460 million) that year by giving out vouchers for online shopping in return.
Due to intensified competition among municipalities to attract donations with gifts such as online vouchers and personal computers, the government last year revised the scheme and only allowed locally produced items equivalent in value to less than 30 percent of donations as return gifts, while barring Izumisano and the three towns from taking part in the program, arguing that their way of attracting donations was against the program's intended purpose.
In January, the Osaka High Court ruled the internal affairs ministry's decision to bar Izumisano from the scheme was justifiable.
Izumisano had criticized the central government's change of the rule on return gifts, saying that areas with popular local products have an unfair advantage.
"We will take necessary measures in accordance with the court decision as soon as possible," internal affairs minister Sanae Takaichi said after the ruling.
The ministry will soon decide to repeal the four municipalities' exclusion from the program, ministry sources said.
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