Education, welfare, fire defense, rescue, garbage management, and most of the local services closely related to our daily lives are provided by municipalities and prefectures. Local taxes are a source of funding for such services, borne widely and jointly by the inhabitants of the community and other interested parties, and imposed by prefectures and municipalities according to ordinances.
The LTB controls the Local Tax Law, which specifies a framework for such local taxes. Passing through debate each year at the Government's Tax Commission, the Ruling Party's Tax Commission, and other deliberating bodies, the LTB conducts taxation revisions every year based on changes in the socioeconomic situation and other affairs.
- TOP
- ＞Local Tax Bureau(LTB)
As a player in running the system of local taxes
Enhancing local taxes (Fig. A)
Note:
- The percentage in each tax item is the percentage calculated on the basis that the total of national taxes and local taxes respectively is 100%.
- National taxes include the special account.
- Local taxes include surplus imposed taxes and taxes not legally required.
- Local inhabitants taxes on individuals imposed prefectural inhabitants tax dividends and prefectural inhabitants tax capital gains and do not include.
- Fixed asset taxes are the sum of land, housings, and depreciated assets.
- Two corporate taxes are the sum of corporate prefectural resident's tax (corporate equal apportionment and corporate tax apportionment),
's tax (corporate equal apportionment and corporate tax apportionment ), and corporate business tax.
The incomes of local authorities (specified in the regional financial plan for fiscal 2008 at 83.4 trillion yen) include local taxes, along with local allocation taxes, shares for governmental subsidies and local bonds. Local taxes totaled 40.5 trillion yen, accounting for 48.5% of the total. To allow local governments to run their administration and finance voluntarily and autonomously in line with the progress in regional decentralization, it is necessary to increase these local taxes, which are a membership fee for the community, thereby increasing their percentage to the total revenue.
On the other hand, the percentage of tax revenues borne by the citizens, as the ratio of national to local taxes, is about 6 to 4. As the ratio on a final expense disbursement base, on the other hand, it reverses itself to a ratio of about 4 to 6. There is consequently a significant gap in tax source distribution between tax revenue and final expenditure.
Local finances largely depend on subsidies from the central government. The financial flexibility of local governments, both in terms of revenues and expenditures, should be increased. Therefore, since Basic Policies 2002 (June 2002), "the reform package of three issues" consisting of: (1) reforms in state subsidies, (2) transfer of tax base from the state to the regions , and (3) reforms in local allocation taxes has been promoted. As a result, a tax base of about 3 trillion yen has been transferred from the state to the regions since 2007.
For the time being, the LTB targets a tax revenue ratio of 1 to 1 for the ratio of national to local taxes, thereby increasing the revenues from local taxes. Also, in order to correct the uneven distribution of tax revenues among regions, the LTB reviews tax source distribution among national and regional governments on the one hand and local taxation on the other, while working to build a local tax system with low unevenness of distribution supporting regional decentralization.
Basic direction of reforms on local taxes and correction of unevenness in tax revenues between regions (Fig. B)
In addition to the huge outstanding obligation of regional finances, expenses related to regional social security including measures to combat the declining birthrate will be further increased due to a rapidly declining birthrate and aging. Additional sources of funding necessary for enhancing regional welfare should be secured in the future.
Therefore, in terms of future local taxation and efforts to promote further decentralization of power from the central government to local governments and enhance local tax sources as the basis, the LTB will work to realize local tax reforms, such as enhancement of local consumption tax, reviewing taxation on local corporations as pertaining to fundamental changes in taxation including consumption tax according to the basic policy on establishing a local tax system with low unevenness of distribution and stable tax revenues.
With the rapid recovery of tax revenues involving two corporate taxes (corporate resident's tax and corporate business tax), regional differences in tax revenues have widened the gap in financial capability.
In view of such a situation and in order to correct the of regional unevenness in tax revenues, tentative measures have been taken to separate part of the corporate business tax with high unevenness as a "corporate local special tax" and distribute the tax revenue as a "corporate local special transfer tax" as per the revision of taxation made in fiscal 2008.
Note:
- The values indicate shares in the total nationwide amount settled for fiscal 2006 after the settlement of local consumption tax.
- Two corporate taxes, local consumption tax and local taxes include those from municipalities, but excludes surplus imposed taxes and taxes not stipulated in the Local Tax Law.
- Two corporate taxes are the sum of the corporate prefectural resident's tax, corporate municipal resident's tax and corporate business tax.
*eLTAX website: http://www.eltax.jp/
February 2005 saw the launch of the service under the Local Tax Portal System (eLTAX). The eLTAX is a system for electronically following various formalities related to local taxes on the Internet.
Declarations, applications, payments, and other formalities for local taxes have had to be filed with the respective local authorities to date. By using the eLTAX, citizens can now complete these formalities with the respective local authorities through a single electronic contact.
eLTAX can now be used for declaring corporate prefectural resident's tax, corporate municipal resident's tax, corporate
business tax, fixed assets taxes (for depreciated assets) and business office tax in all prefectures nationwide, along with 15 ordinance-designated cities and three other cities (as of April 2008).
eLTAX will be accessible to more municipalities throughout Japan where possible. Examination will be conducted to provide greater convenience, including linkage with the national tax electronic declaration/payment system (e-Tax).
The eLTAX is operated by the Local Tax Digitization Council, which consists of local authorities.