The government and the ruling coalition are thinking of redistributing revenues from the local corporate tax to equalize financial gaps among different prefectures. About ¥400 billion will be redistributed to financially weak prefectures by taking about ¥300 billion from Tokyo, about ¥80 billion from Aichi Prefecture and about ¥20 billion from Osaka Prefecture. This measure should be considered as a temporary measure. The fact that companies pay the tax because they receive services from local governments must not be forgotten. In addition, the redistribution will not thoroughly solve the problem of inequality in tax revenues. A permanent approach must be considered.
Tokyo, Aichi and Osaka, where large firms are concentrated, receive a large amount of revenues from the local corporate tax and corporate residents' tax. The Finance Ministry first hit on the idea of redistributing about ¥1 trillion by taking revenues from these two kinds of taxes in the three megalopolis areas. But facing strong resistance from prefectural governors, it decided to redistribute revenues only from the local corporate tax.
There are great gaps in revenues between the taxes. Per capita revenues from them in Tokyo, which receives the largest amount, is about six times the corresponding figure in Nagasaki Prefecture, which receives the least amount. In fiscal 2007, Tokyo is expected to generate about ¥1.4 trillion from the local corporate tax, about one-fourth the total revenue from the tax.