The government devolution panel handed Prime Minister Yukio Hatoyama its fourth and final set of recommendations Monday, calling for an increased allocation of tax money to local governments. Regrettably, the central government has been slow to respond to the third set of recommendations, which called for, among other things, abolishing or relaxing 104 standards the central government has imposed on local governments with regard to services for residents. It should act quickly on both sets of recommendations.
Among short-term measures, the panel in its final report calls for raising the ratio of revenue from five major national taxes — including income, corporate and consumption taxes — that is allocated to local governments as grants in aid. At present, the ratio is about 30 percent. For the past 10 years, the grants have had to be beefed up with additional money from the nation's general account budget and with bonds floated by local governments. The central government should try to cope with a possible decline in the amount of money available to it by transferring more administrative functions to local governments and abolishing regional bureaus of government ministries.
As for the central government's plan to abolish the surcharges on road-related taxes, which would result in a loss of ¥810 billion annually for local governments, the panel called for measures to ensure the security of local governments' funding.