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.