Paying taxes to one’s hometown
Kamishihorocho in Hokkaido, Japan is a typical dairy farming town. The population of 5,000 raise some 34,000 cows. Two years ago, the town received donations from all over the country of more than 970 million yen ($8.44 million). The sum was greater than annual tax revenue at 640 million yen.
The secret was the popularity of its wagyu beef, a gift for donation. Donors could choose a gift from 50 local specialties that included beef, produce and crafts. The price of the gift is half the donation. Kamishihorocho can now provide child care and kindergarten for free for 10 years. New school buses for elementary and middle school have been purchased. According to Yasuaki Konishita, an official in charge of the donation, the money was used mostly on population reduction prevention. The region has long struggled with an aging population.
The donations to Kamishihorocho is an example of the system of paying hometown taxes. The central government introduced the system in 2008 to close the gap between tax revenue in big cities and rural areas. It is a system meant to help a person’s hometown or support a local government of his or her choice. Anyone who donates to a local government gets a tax deduction for the entire amount minus 2,000 yen. The upper limit is 20 percent of the resident tax. For a salaried worker with a stay-at-home wife earning 5 million yen a year, the upper limit is 59,000 yen. It used to be 30,000 yen but was nearly doubled last year. The limit is higher for higher incomes.
Currently, 1,788 local and metropolitan government bodies have implemented the system, and 80 percent send gifts to donors. There are more than 50,000 varieties, including local specialties, alcoholic beverages, manufactured goods, exhibition tickets and tour products.
The price of the gifts is 30 to 50 percent of the donation. Local governments post the number of donations, the total amount and where the money was used on their websites. Some allow the donors to designate where the money should be spent. This system reminds us of the purpose behind taxes.
The system of paying tax to one’s hometown is established now. In the first half of last year, 22.7 million donations added up to 45.3 billion yen, more than the 2014 total of 38.9 billion yen. It has grown drastically from the 50,000 donations amounting to 8 billion yen. The program has been publicized and the process has been simplified.
Additionally, the gifts are appealing. The impact of a 2,000 yen donation per person is significant. People feel the joy of sharing and take advantage of local specialties, while the local economy gains energy. Many regions have secured distribution channels for agricultural and fisheries products and expanded jobs and their number of visitors. They work hard and compete to come up with ideas to attract donations.
But there also are problems. Tax revenue in urban areas is decreasing, and the gap between local governments is growing. However, these concerns can be tolerated considering the benefits.
Just like Japan, we may want to think about how to revive local towns struggling with population decline and a fiscal deficit. The key is a system based on legal grounds. No country can thrive without local economies.
The author is the Tokyo bureau chief of the JoongAng Ilbo.
JoongAng Ilbo, Feb. 6, Page 26
by OH YOUNG-HWAN