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JapanNews/2018/12/6 20:10

Advance correction of tax revenue gaps between Tokyo, regional govts

The Yomiuri ShimbunWith the advance of a unipolar concentration of everything in Tokyo, how can the disparity in tax revenues between the Tokyo metropolitan government and regional bodies be reduced? The central and local governments need to do everything they can to craft appropriate rules.
Over the issue of the redistribution of local tax revenues, the central government and the ruling coalition parties — the Liberal Democratic Party and Komeito — are at loggerheads with the Tokyo metropolitan government over their assertion.
The government and the ruling parties are poised to double the amount of tax revenues that are redistributed from Tokyo to regional bodies from the current annual amount of about ¥400 billion to more than ¥800 billion. Tokyo has strongly resisted this move.
In terms of the amount of local tax revenue per resident, that of Tokyo residents — higher per resident than in any other prefecture — is 2.4 times the per resident amount of Okinawa Prefecture, which is the lowest of all. In terms of revenues from corporate enterprise tax and corporate inhabitant tax, imposed by local governments on corporate income and the like, the amount per Tokyo resident is 6.1 times the tax revenue per resident of Nara Prefecture, which sits at the bottom of the list.
As the proportion of direct taxes within the local tax system is high, tax revenues tend to concentrate in Tokyo, where there is a large number of businesses of all sizes, as well as the head offices of big companies.
On the other hand, regional governments have been confronted with depopulation and a hollowing-out of industries. Given the present state of affairs in which regional economies remain sluggish, it is inevitable that local tax revenues, the distribution of which unevenly favors Tokyo, would be redistributed to those governments.
The government and the ruling parties have changed tack and are now poised to effectively continue the redistribution of corporate enterprise tax to regional bodies, which was originally set to be abolished in October next year. By the middle of this month, when the ruling parties’ outline of its tax system revision for fiscal 2019 is expected to be compiled, the government and ruling parties will have worked out the details of the new system.

Promote local economies
The problem is that the content of relevant discussions is hard to perceive from the outside. The government and the ruling parties should enhance the transparency of their talks and discuss the issue in such a manner that the people can understand.
The Tokyo metropolitan government claims that it has lost as much as ¥2.2 trillion in tax revenue over the past 10 years. It also asserts that when allocations from the local tax grant system are factored in, “the amount of tax revenue per Tokyo resident is almost on par with the national average.”
Being a government of a place with a large population, it would be necessary for it to secure a huge sum for budgets concerning measures to deal with disasters and an aging population in the future. The reasons for Tokyo, which has put up with the redistribution of tax revenues until now, becoming discontented are also understandable.
What is necessary, in the first place, is to rectify the local tax system into one that will not bring about any extreme disparities in tax revenue among local governments.
The local consumption tax — an indirect tax — is characterized by its having a smaller regional disparity in revenue than that of revenue from local corporate taxes — a direct tax.
In order to support ever-increasing social security expenses, it is unavoidable for the national consumption tax rate to be raised to a level above 10 percent in the future. Wouldn’t it be effective, in that event, to also raise the local consumption tax rate, thus raising the proportion of indirect taxes as part of total local tax revenues?
It is unproductive for governments of major cities and regional areas to repeatedly “struggle for a bigger share of the pie” in tax revenue. It is essential for local governments, in a bid to increase tax revenues, to continue making efforts to vitalize their economies.
Each local government, while cooperating with the central government, should strive further to invigorate its economy individually, including by promoting local industries.




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