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

Natalia V. Pokrovskaia, Andrey V. Belov


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



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


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