In Japan, people choose where to pay their taxes based on thank you gifts

In a bid to raise more tax revenue, the coastal city of Numazu near Mount Fuji is offering free welding lessons

Doesn’t that look fun? How about a test drive of a Porsche, some live koi or a big packet of toilet paper? Still not interested? What if you were mayor for a day?

Japan has a system that allows taxpayers redirect part of your local taxes to towns or villages where they do not live and receive a gift in return or some other sign of gratitude. But what started as an effort to help rural areas with population loss has become a bitter battle between municipalities who give gifts to attract enough tax to maintain public services.

“The truth is that people choose where to donate based on gifts thank you,” said Kazuya Misawa, a Numazu government official. “So we thought: how are we different from other cities and towns? How do you win?

Almost nine million contributors they participated in the system last year, the highest number since its launch fifteen years ago. According to the rules, the typical taxpayer can redirect about 20% the part of your “housing taxes” which depends on the receipts of other local authorities, which can then be spend about 30% of this amount in donations. In the fiscal year ending March 2023, donations under this system approached 1 trillion yen, or nearly $7 billion.

The program was created to helping rural areas where tax revenue eroded as Japan’s population shrank and people moved away move to big cities . The idea was that these city transplants could support their region of origin and get some of your favorite local produce, like grapes or peaches, for free. Your ‘local tax’ payments can be deducted from your local tax bills and sometimes from your income tax.

The program was a great success and turned into a frenetic competition for attract payment of tax with a wide range of gifts. Many in Japan now equate the program with online shopping.

The Japanese Interior Ministry is trying to curb these excesses. “It’s not about buying,” said Yuta Akutsu, an official with the ministry’s municipal tax division. “It just became something that looks like shopping ”.

Each year, Yoko Koizumi, a financial planner in Yokohama, uses the program to fill your pantry with staples like meat, fish, and vegetables, and with luxuries you wouldn’t otherwise buy, like scallops, fish roe, and crab.

“Normally I don’t choose to donate somewhere because of a connection to the place,” he said. “It’s more because I’m looking at the thank you gift and I think: ‘I really want to eat this’”.

Her kids, she noted, like to mark where each product comes from on a map by their bathtub. “Even if it’s a vegetable they usually hate, they’ll eat it,” he said.

Taxpayers can find gift options in more than one a dozen platforms online. Blogs have sprung up where attendees review giveaways and post ranked lists of the best cherries or tuna.

The maximum tax-deductible amount that taxpayers can donate in a year depends on the size of your tax bill. Those with higher salaries get more free stuff. On popular local tax blogs, some people claim receive between 50 and 200 gifts per year . One participant said that she furnished a large part of her apartment thanks to the program.

Former Prime Minister Yoshihide Suga, who designed the program while in another government post, said in an interview that he had exceeded your expectations. He says he’s making a donation to a northern town where he grew up in a strawberry-growing family, “with no thank you gift in return,” he added.

The redistribution of tax revenues it created losers and winners. The Setagaya district of Tokyo was particularly affected. In the year ending March 2024, this section of the city expects to record a loss of nearly $70 million in tax revenue through deductions from the local tax system.

“This system is a mistake,” Setagaya Mayor Nobuto Hosaka said. If losses continue to mount, he says, the district could have difficulties in financing the service such as road repairs and garbage collection.

At first, Setagaya refused to offer thank-you gifts because disagreed with the concept of reward . Last winter, it gave in by introducing hotel and restaurant gift cards, candy and high-end jewelry. Donations have doubled.

In 2019, the national government began to prevent municipalities from participating if they spent more than 30% of the value of donations as gifts or if they offered products that were not produced locally.

Goka, a town north of Tokyo, recently started offer ownership of five vehicles construction equipment (a crane, a dump truck and three bulldozers) in exchange for a donation of nearly $2.5 million.

Takikawa, a city in population decline located on the northern island of Hokkaido, offers the chance to be mayor for one day in exchange for a donation of one million yen, or about $7,000. A donor could sit in the mayor’s chair and seal a mock decision, talk to the townspeople about the town’s problems, and eat their famous lamb stew, cooked by the real mayor.

Kokichi Maeda, the mayor, said funding for the system had helped to offset the drop in tax revenue. The city also offers donors the opportunity to fly in a glider.

In Numazu, 10 people have so far accepted an offer to take a half-hour welding course at a local steel factory in return for paying taxes of around $70.

Numazu too plans to offer diving and golf packages. Misawa, the local manager, said the 96-roll packs of toilet paper, produced at a local factory, were one of the most popular items on offer.