Forestry tax merits scrutiny

The government is introducing a tax that will finance efforts to manage and conserve abandoned forests across the country. Proper management of forests contributes to the fight against climate change since they absorb the heat-trapping carbon dioxide. Conservation of forests helps prevent natural disasters since they preserve headwaters and mitigate mudslides. Efforts to promote adequate management of forests, which account for a majority of Japan’s national land, make sense. The question is how effective the planned tax scheme will be to achieve that.

The fiscal 2018 tax reform outline, adopted by Prime Minister Shinzo Abe’s ruling coalition, calls for introduction of the new levy, called the forest environment tax, beginning in fiscal 2024. It will be imposed in the form of a uniform ¥1,000 annual surcharge on the individual residential tax currently paid by roughly 60 million people nationwide. The national government, which will collect and distribute the incoming revenue to prefectures and municipalities, expects the total revenue to reach some ¥60 billion a year.

One problem with the planned scheme is that the amount distributed to individual local governments will be small, raising doubts as to how helpful the money will be for each municipality to fund its forestry management efforts. The initial plan was to distribute the revenue among only a limited number of municipalities chosen on the basis of privately owned forestry space in their respective areas, but in the end it was decided that the revenue would be provided to all prefectures and municipalities — apparently to avoid incurring criticism from those in urban areas. As a result, the tax revenue will be divided among more than 1,750 prefectures and municipalities.

Under the forest management system being prepared by the Forestry Agency, municipal governments will take charge of managing abandoned forests in their areas whose private owners cannot be identified, recommissioning management of part of such forests to forestry business operators while taking care of the rest themselves. Much of the plantation forests created across the country for wood production in the postwar years are said to be in a state of abandonment today, with cedar and cypress trees ripe for logging left unattended by their small-scale owners. But since the revenue from the new tax given to each municipality will come to just tens of millions of yen a year, how much help the tax will be in funding these efforts by the municipalities is in doubt. Some of the municipalities in urban areas will have little experience and know-how in managing forests, and promoting the use of lumber has been added to the purpose of the tax revenue.

The Forestry Agency’s new system for forest management will be launched in fiscal 2019. However, the new forest environment tax will be introduced in fiscal 2024 — after the current ¥1,000 surcharge on individual residential tax designed to finance reconstruction from the 2011 Great East Japan Earthquake and tsunami ends in fiscal 2023 — ostensibly to avoid adding to people’s tax burden.

But another problem with the new tax is that many prefectures already collect local taxes for the similar purpose of funding forest management efforts. For residents in the 37 prefectures, and the city of Yokohama, that have their own taxes, the new national levy will come as a dual burden for a similar agenda. How the uses of revenue from the national and local taxes will be differentiated remains to be seen. Before introducing the new tax, it should be determined whether the funding for forest management programs cannot be secured by cutting back on government spending in other areas. It also needs to be made certain that revenue from the new tax will be spent where it’s really needed and not to create yet more government waste.

The forest environment tax is one of two new taxes being introduced for the first time in 27 years. The other is the international tourist tax, which will impose ¥1,000 on every traveler departing Japan — both foreign and Japanese — to raise funds for measures to promote the booming inbound tourism industry. The additional burden on taxpayers may be small for both taxes. But decisions to introduce the two new taxes were made without much public discussion on their necessity and effects. Whether the planned forest environment tax scheme will serve its intended purpose should be closely examined in the Diet.