Japan Gives Tax Breaks In Exchange for Donations to Local Governments

The government has started considering expanding the so-called “hometown tax” payment system in which taxpayers are granted tax breaks if they make cash donations to municipalities they no longer reside in or to local governments they want to support.

The government is looking to expand the system from fiscal 2015. The government plans to double the maximum amount of tax-deductible donations and simplify procedures for claiming tax deductions. It is to incorporate the new scheme into a fiscal 2015 tax reform plan due to be worked out at the end of this year. The expanded system is aimed at promoting cash donations to local municipalities. Prime Minister Shinzo Abe’s government, which places priority on measures to revitalize local economies, wants to make it an eye-catching policy ahead of next spring’s unified local elections.

Under the hometown tax payment system, taxpayers pick their hometowns or local governments which they want to support and make cash donations to them. Under the current system, a donation amount in excess of 2,000 yen can be reduced from the donor’s residential and income taxes. It allows individuals to make cash donations to local governments of their choice instead of paying taxes directly to municipalities where they reside and the central government.

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza