Gaia Series 33: "Hometown Tax Donation System" Is Booming
Japan's hometown tax programme is highlighted this week, with a focus on the local specialities and products which are offered as gifts in exchange for tax-deductible donations to municipalities.
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This week, the spotlight is on Japan’s hometown tax programme. Residents can pick which municipality to give tax-deductible donations to in return for gifts such as local specialities and products. These gifts have to be 30 per cent or less of the value of your donations. The amount donated can be deducted from residency or income taxes.
In Shinjuku Tokyo, there is a shop boasting famous products and local hidden treasures from all of Japan’s prefectures. Examples are white daruma dolls from Ishikawa Prefecture, Japanese sweets from Kaga City, Ishikawa and seasoning from Moroyama in Saitama. These gift items are offered as part of the government's hometown tax programme. Total hometown tax contributions for FY 2022 came up to nearly one trillion yen, the highest ever. Popular gift items from the hometown tax programme include salmon roe marinated in soy sauce, Japanese scallops from Okhotsk, a shabu-shabu set with snow crab, an "Omoiyari" traditional three-tiered box from Komaki City, Aichi and a grilled meat selection of rare cuts from Kitsuki City, Oita.
For six years straight, the town of Sakai in Ibaraki Prefecture has been ranked number one in Kanto for hometown tax donations. In 2022, its hometown tax donations reached 5.9 billion yen. These donations have helped to build the town’s facilities. One example is an electronic bus that travels a route that includes places like local tourist spots, the town hall and hospitals. Other places built with hometown tax donations are the Sakai Town Niko Niko Park, an all-weather park for children, and the Sakai Town Urban Sports Park, the largest BMX facility in Japan.
The hometown tax programme has also helped to attract more tourists to the area. In September 2023, the Tonegawa Major Fireworks Festiva drew a crowd of 300,000 people, a 10-fold increase. Ten years ago, among the 1,700-odd municipalities in Japan, Sakai was 29th from the bottom in terms of finances. But with the expansion of the hometown tax system and several regional support initiatives, the town underwent rapid improvements.
To increase contributions, Tomitaro Noguchi from the Sakai-Machi Tsukuri Public Corporation worked with the town’s mayor to develop ideas for hometown tax gift items. Mr Noguchi is behind various famous gifts. The Meishan pig brand is the pride of the local area. Those who donate 18,000 yen can receive a block of Meishan pork belly. Tone River eel has long been a local delicacy. With a donation of 10,000 yen, a person can get three Japanese eels. Twelve thousand yen can get you marbled slices of Hitachi beef raised in Sakai, while a donation of 14,000 yen allows you to get a 20kg gift of four varieties of rice.
Mr Noguchi is actually the fifth-generation owner of a traditional speciality tea shop with a history of more than 150 years. It sells the area’s famous tea variety, Sashima. His most prized tea is also offered as a gift item for the hometown tax programme. The specially selected tea set is offered for a donation of 10,000 yen. In 2016, Mr Noguchi was chosen to head the Sakai-machi Tsukuri Public Corporation, which leads the hometown tax efforts. He even started his own factory in November 2023, producing Ibaraki’s famous dried steamed sweet potato. It primarily hires local workers. Each potato is prepared by hand and uses the “Beni Haruka” variety of potatoes which are farmed all over Ibaraki. Furthermore, he set up a cafe for people to try dried sweet potato products. Its flagship product is dried sweet potato on thickly cut toast, called Hoshiimono Toast, which is also a gift item under the hometown tax programme. Other products sold at the cafe are Hoshiimono pudding and Hoshiimono whole dried pie.
Let us turn our attention to Tsuno Town in Miyazaki. Here, the famous local delicacy blowfish and Japanese black beef were previously used as gift items for the hometown tax programme. In FY 2021, Tsuno’s hometown taxes amounted to more than 10 billion yen, ranking it at number six nationally.
Municipalities across Japan create attractive gift items to persuade people to donate hometown taxes. However, there are some examples of municipalities being removed from the system for offering excessive gift items that run afoul of the rules. An example is Izumisano City in Osaka. It became known for giving Amazon gift cards along with gift items. At one point, it had the most donations in the country. The campaign launched by Izumisano City including gift cards did not offer a discount of less than 30 per cent of donations. Because of this, Izumisano City was removed from the hometown tax system by the Ministry of Internal Affairs. Izumisano City appealed the ruling all the way to the Supreme Court, won the case and was reinstated into the system.
Tsuno Town in Miyazaki is another municipality that has been removed from the hometown tax system. It used to be a flourishing centre for the production of grapes. It was ranked sixth in Japan in terms of receipts of hometown taxes in 2021. In January 2022, it was found to be offering discounts infringing the threshold of being less than 30 per cent of donation value. One company was unable to fulfil gift orders for the popular Miyazaki beef gifts and began buying expensive beef to cover the orders. It therefore infringed a rule stating that gift items must be 30 per cent or less of the value of the tax donated. So the Ministry for Internal Affairs removed Tsuno from the hometown tax system for two years.
Tsuno’s mayor decided to make a new application to the hometown tax system in 2024. Takumi Kawano, on secondment to the Miyazaki Prefectural offices, was tasked with getting Tsuno back in the hometown tax system. Mr Kawano has had to arrange an attractive line-up of products again. As beef is part of the gift item line-up, he ties up with Big Farm, which raises Japanese Black cattle. He also goes to En Ramen, one of the most popular ramen restaurants in Miyazaki. It has been around for almost 20 years. Mr Kawano negotiated with restaurant owner Shunji Shiotsuki to create a new product to be offered as a gift item under the hometown tax programme. Mr Shiotsuki came up with the idea of Chardonnay Ramen, using Tsuno wine. This ramen has three different types of chicken broth and charcoal-grilled chashu.
Tips:
1) The hometown tax system helps to boost the local economy and attract tourists
2) Local products and delicacies make the perfect gifts under the hometown tax system
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