Tax Revenues of Local Budgets in Unitary States: a Case Study of Japan

Natalia V. Pokrovskaia, Andrey V. Belov

Abstract


This article discusses municipal self-government in Japan by focusing on tax receipts of local budgets. Revenues and expenditures of local governments of unitary states, such as Japan, roughly corresponds to subnational budgets of federal states. In unitary frameworks, however, local authorities enjoy greater autonomy. In Japan, local governments account for a large share of public spending and tax revenues. Tax re-venues are decentralised and taxes play a significant role in consolidated budget receipts. The centralised system of local administration and finance that evolved in late nineteenth-century Japan was based on arrangements prevailing in Germany at that time. In the second half of the twentieth century, the system of inter-governmental fiscal relations was rebuilt according to the Anglo-Saxon decentralised model, resulting in more autonomy (including tax administration) given to local authorities. The current version of the local public finance in Japan has several salient characteristics and combines both centralisation and decentralisation features. The tax base for the key prefectural and municipal taxes overlaps the tax base for the national income and consumption taxes. The main source of municipal revenue is the property tax. Financial equalisation is achieved through grants, essentially in the form of the local allocation tax (LAT), which is a percentage of national taxes that is channelled to prefectural and municipal budgets. Another important feature of local finance is that municipal governments cover a comparatively large share of expenditures by is-suing local bonds. The reform of local governance and inter-governmental fiscal relations conducted in the early 2000s increased the financial autonomy and tax receipts of municipalities. The reform’s results were positively received by the international community and may be interesting for several transitional and developing economies that are seeking to improve their system of local finance.

For citation

Pokrovskaia N.V., Belov A.V. Tax Revenues of Local Budgets in Unitary States: a Case Study of Japan. Journal of Tax Reform. 2020;6(1):73–89. DOI: 10.15826/jtr.2020.6.1.076.

 Article info

Received February 14, 2020; Revised March 15, 2020; Accepted April 8, 2020

 


Keywords


local budget, local finance, local taxes, tax revenues of local governments, Japan, prefectures, municipalities, tax allocation

References


Steiner K. Local Government in Japan. Stanford, CA: Stanford University Press; 1965. Available at: https://archive.org/details/localgovernmenti0000stei.

Kume I., Iqbal F., Muramatsu M. (eds) Local Government Development in Post-war Japan. Oxford University Press; 2002.

Saprykin D.A. Evolution of Local Self-Government in Japan in the Nineteenth and Twenty-First Centuries. Moscow; 2012. (In Russ.)

Streltsov D.V. (ed.) Political System of Contemporary Japan. Moscow: Aspekt Press; 2013. (In Russ.) Available at: https://mgimo.ru/upload/iblock/dc0/politicheskaya-sistema-sovremennoj-yaponii.pdf.

Sims R. Japanese Political History Since the Meiji Restoration 1868–2000. Palgrave Macmillan US; 2001. DOI: 10.1007/978-1-349-63240-4.

Banno J. The Establishment of the Japanese Constitutional System. London and New York: Routledge; 1992. Available at: http://bookre.org/reader?file=1092498&pg=3.

Salina N.V. Investigation of the Problems of Local Taxation’s at Saint-Petersburg University in the Second Part of the XIX – the Beginning of the XX Century. Vestnik Sankt-Peterburgskogo universiteta. Ekonomika = St Petersburg University Journal of Economic Studies. 2010;(1):102–111. (In Russ.) Available at: https://economicsjournal.spbu.ru/article/view/2989.

Brownlee W., Ide E., Fukagai Y. (eds) The Political Economy of Transnational Tax Reform. The Shoup Mission to Japan in Historical Context. Cambridge University Press; 2013. DOI: 10.1017/CBO9781139519427.

Shoup C.S. et al. Report on Japanese Taxation by the Shoup Mission. Tokyo Japan: General Headquarters, Supreme Commander for the Allied Powers; 1949. Available at: http://www.rsl.waikei.jp/shoup/shoup00.html.

Beyer V. The Legacy of the Shoup Mission: Taxation Inequities and Tax Reform in Japan. Pacific Basin Law Journal. 1992;10(2);388–408. Available at: https://escholarship.org/uc/item/7wn0f37c.

Bronfenbrenner M., Kogiku K. The Aftermath of the Shoup Tax Reforms. Part I. National Tax Journal. 1957:10(3):236–254. Available at: https://www.jstor.org/stable/41790692.

Akira A. The Making of the Postwar Local Government System. In: Ward R., Yoshikazu S. (eds) Democratizing Japan. The Allied Occupation. University of Hawai’i Press; 1987, pp. 251–282. DOI: 10.2307/j.ctv9zcm6g.13.

Ishi H. Historical Background of the Japanese Tax System. Hitotsubashi Journal of Economics. 1986;29(1):1–20. DOI: 10.15057/7843.

Shah A. (ed.) Local Governance in Industrial Countries. Washington: World Bank; 2006. DOI: 10.1596/978-0-8213-6328-7.

Matsui Sh. The Role of Central Government and Local Government in Times of Crisis. Japan’s Experience after the Great East Japan Earthquake Disaster, In: Harding A., Sidel M. (eds) Central-Local Relations in Asian Constitutional Systems. Oxford and Portland, Oregon; 2015, pp. 125–148.

Muramatsu M., Naschold F. State and Administration in Japan and Germany: A Comparative Perspective on Continuity and Change. De Gruyter, Inc; 1996.

Kimura Sh. Regional Administration in Japan. Departure from Uniformity. London: Routledge; 2017. DOI: 10.4324/9781315636740.

Suzuki H., Kanda K. Issues of Local Finances and Factors of Its Future Developments. Daiwa Soken Reports, 2018;30. (In Japan.)

Horiuchi Yo. Problems of Local Finances and Reform. Norin Kinyu. 2016;5. (In Japan.)

Hachiya K. Disparities in Administrative Services and Distortions of Local Finances. JRI Review. 2018;9(60). (In Japan.)

Ito T., Hoshi T. Japanese Economy. 2nd ed. Cambridge: MIT Press; 2020. Available at: https://mitpress.mit.edu/books/japanese-economy-second-edition.

Mochida N. Fiscal Decentralization and Local Public Finance in Japan. London: Routledge; 2008. DOI: 10.4324/9780203894910.

Kimura Sh. Goals and Reforms of Current Japanese Local Tax System. Hitotsubashi Journal of Law and Politics. 2015;43:17–48.

Ishida K. The Trade-Off Between Growth and Stability in Prefectural Tax Revenue in Japan. International Journal of Public Administration. 2013;36(3):210–221. DOI: 10.1080/01900692.2012.713302.

Ishida K. The Growth and Stability of the Local Tax Revenue in Japan. Public Budgeting & Finance. 2011;31(1):56–75. DOI: 10.1111/j.1540-5850.2011.00974.x.

Tran T., Drew J., Noguchi M. The Role of Revenue Volatility in Local Expenditure Volatility: A Comparison of Tokyo Metropolitan Local Governments. Economic Papers. 2018;37(4):443–455. DOI: 10.1111/1759-3441.12228.

Bessho Sh., Ogawa H. Fiscal Adjustment in Japanese Municipalities. Journal of Comparative Economics. 2015;43(4):1053–1068. DOI: 10.1016/j.jce.2014.10.007.

Tajika E., Yui Yu. Fiscal Decentralization in Japan: Does It Harden the Budgets of Local Governments? In: Kaizuka K., Krueger A. (eds) Tackling Japan’s Fiscal Challenges: Strategies to Cope with High Public Debt and Population Aging. Palgrave Macmillan; 2006, pp. 112–139. DOI: 10.1057/9781137001566_7.

Bessho Sh. A Case Study of Central and Local Government Finance in Japan. In: Yoshino N., Morgan P. (eds) Central and Local Government Relations in Asia. Achieving Fiscal Sustainability. Edward Elgar Publishing; 2017, pp. 306–332. DOI: 10.4337/9781786436870.00018.




Copyright (c) 2020 Natalia V. Pokrovskaia, Andrey V. Belov

eLibrary logoeLibrary logo  DOAJ logo ERIH PLUS logo 

© Journal of Tax Reform : ISSN 2414-9497 (online), ISSN 2412-8872 (print)