2,000 words about the Local Allocation Tax System in Japan. Points: (1) rough sketch of the system, (2) the reasons why it was introduced, (3) the difficulties the syst
2,000 words about the Local Allocation Tax System in Japan.
Points:
(1) rough sketch of the system,
(2) the reasons why it was introduced,
(3) the difficulties the system have and
(4) if you think it right that local governments should mainly depend on its own tax resources.
Local Government System in Japan
14 April, 2022
Kamiko Akio
Professor
College of Policy Science
Ritsumeikan University
I. Points to be considered
1. What is local government?
What is residents’ local self-government?
What is corporate local self-government?
2. What are the merits of local self-government?
Is decentralisation always good?
3. Framework determined in the Constitution of Japan
Chapter 8 Articles 92 through 95
II. Japan’s Local Government System
1. Features of Local Government System in Japan
(1) Japan has two tiers of local governments.
Japan is divided into 47 prefectures and these prefectures are subdivided into 1,718 municipalities (as of April 2022). There were 3,100 municipalities on May 1st of the year 2005. The number has decreased as a result of an amalgamation campaign by the central government.
Of the 47 prefectures, Tokyo has a somewhat special system, being the capital and the largest metropolitan area. In the central area of Tokyo, twenty-three Special Wards (This is a standard translation in English, but they call themselves a “city” and they want a status as such.) exist in lieu of municipalities. Their functions are a little more limited compared with those of municipalities.
Municipalities differ greatly in terms of population. The largest, Yokohama City has a population of nearly 4 million and the smallest has that of less than two hundred. (According to its HP, Aogashima Island Village has a population of 165 as of April 1, 2010. According to 2015 Population Census, the population was 178 on October 1, 2020.) Despite this great variety, they are, in principle, treated almost equally.
The exceptions are:
a) Smaller municipalities (towns and villages), are responsible for less tasks than bigger ones (cities).
b) Larger ones among cities have bigger responsibilities (designated cities, etc.) than ordinary cities.
There was an argument concerning rearrangement of prefecture system at the moment, which aims to have larger and, consequently, fewer entities, whose nature may be different from the present prefectures, in their place. But this has quieted down recently.
Also there is an argument about what form of government is optimal for large metropolitan areas like Osaka.
(2) Each local government in Japan has an elected chief executive.
Governors are responsible for prefectural administration.
Governors are elected by residents who are 18 years old or above. A candidate for governorship must be 30 years old or above.
Each prefecture has a prefectural assembly. A governor needs the prefectural assembly’s consent on certain important matters like budge formulation and bylaw introduction.
Members of a prefectural assembly are elected by residents who are 18 years old or above. A candidate for a prefectural assembly member must be 25 years old or above.
Mayors are responsible for municipal administration.
Mayors are elected by residents who are 18 years old or above. A candidate for a mayor’s position must be 25 years old or above.
Each municipality has a municipal assembly. A mayor needs the municipal assembly’s consent on certain important matters like budget and bylaw introduction.
Members of a municipal assembly are elected by residents who are 18 years old or above. A candidate for a municipal assembly member must be 25 years old or above.
(3) In local governments in Japan, boards like Education Board and Election Administration Board are also responsible for a certain part of administration.
These boards are established to deal with matters which require political neutrality or special knowledge. Board members are mostly appointed by the chief executive of the local government (a governor or a mayor) with the consent of the local assembly. Nowadays, there is an argument about this system as to whether this system is an effective and efficient one or not.
(4) Local governments have no judicial power in Japan.
(5) Local governments in Japan are implementing a large variety of tasks delegated to them by the central government and their roles are of considerable size. Their share in the Final Government Expenditures was 42.6%, while the figure for the central government was 14.8% and 42.6% was paid out by social welfare funds in FY2016. In terms of Public Capital Formation, 49.5% was made by local governments while 23.5% was made by the central government and 26.9% was made by Public Corporations in the same Fiscal Year.)
(6) Local government in Japan has taxing power and imposing a number of taxes.
Those local taxes are levied at almost uniform rates all over the country.
Some examples of the prefectural taxes are tax on corporate profit, tax on individual income and tax on vehicle ownership.
Some examples of the municipal taxes are also tax on corporate profit, tax on individual income and tax on real estate ownership.
(7) There is a financial adjustment system called the Local Allocation Tax System.
This is a system of reserving a certain portion of national taxes in order to transfer them to local governments. Both 33,1% of the Corporate Profit Tax and the Individual Income Tax income, 50% of the Liquor Tax income, 22.3% of the Consumption Tax income and 100% of Local Corporate Profit Tax income are set aside for this purpose. This item occupied 18.1 trillion yen in the total national budget of 107.5 trillion yen in FY2022.
The money is distributed according to the needs of each local government. Therefore, it has a function of equalising the financial capacity between local governments. This means that rich local governments receive nothing or small amount of it and poor local governments receive more of it.
2. History of local government in Japan
Modern local government system in Japan was established in 1870s. At the beginning local governments were more like local administrative branches of the central government, with chief executives appointed by the central government. The system was gradually changed, but it was not until 1946 that the system came near to the present form, with all the chief executives elected directly by local residents.
Speaking more in detail, Japan’s modern administration system was first established in 1868 after the Meiji Restoration. After that time, there were a series of short-lived systems but, finally, in 1888, there emerged a system with a powerful central government, forty-six prefectures (whose governors and key personnel were central government officials appointed by the Minister for the Interior) and about 15,000 municipalities (whose chief executives are in some cases elected by the residents indirectly through local assemblies). The number of prefectures was forty-six instead of forty-seven at the moment, because Hokkaido was not treated in the same way as the other prefectures.
Under this system, prefectures were essentially extensions of the central government with some characteristics as autonomous entities. This was also true for municipalities to a lesser extent and it can be said that Japan’s local governments had two sets of characteristics from the outset, one was that of a self -autonomous entity and the other was that of the local branch office of the central government, although they were given the status of independent legal corporations. In the case of municipalities, the system called for the chief executives being appointed by the central government. Another point of interest is that from the outset all local governments in Japan had local assemblies whose members were elected by local residents, although only male residents with sizable tax payment were given votes at the outset. This was introduced, to some extent, to appease people dissatisfied by the change of the government in 1868 by giving them places where they can express their dissatisfaction.
During the period up to WWII, the system was gradually decentralised. An example was that although the city mayors were still appointed by the central government, the system was changed after 1889 and they were chosen from among the candidates elected by the city assembly. The system for town mayors and village mayors were also gradually changed and, finally, most of them were elected by the municipal assembly concerned and they became mayors without an endorsement from the central government.
During WWII, there were changes due to emergency, and some of the system was re-centralised.
Major change came immediately after the Second World War. Under the supervision of the American authorities, local government systems in Japan saw drastic changes. The most phenomenal of them was the inclusion of Chapter 8 into the new Constitution. This chapter stipulates that:
(1) Regulations concerning organisation and operations of local public entities shall be fixed by law in accordance with the principle of local autonomy. (Article 92)
(2) The local public entities shall establish assemblies as their deliberative organs, in accordance with law. The chief executive officers of all local public entities, the members of their assemblies, and such other local officials as may be determined by law shall be elected by direct popular vote within their several communities. (Article 93)
(3) Local public entities shall have the right to manage their property, affairs and administration and to enact their own regulations within law. (Article 94)
(4) A special law, applicable only to one local public entity, cannot be enacted by the Diet without the consent of the majority of the local public entity concerned, obtained in accordance with law. (Article 95)
Before these stipulations were put into force, laws concerning local governments were provisionally amended so that they would not conflict with the new Constitution. Now both governors of prefectures and mayors of municipalities were to be elected directly by residents.
According to Professor Matsumura, the post-war era can be divided into the following periods.
The period between 1945 and 1955 was the period when a new local government system conforming with Japan’s new democratic administration system was created.
The changes concerning local-central government relations implemented in this period were thorough and far-reaching. Many functions handled formerly by the central government were transferred to local governments. For example, police functions and fire-defence functions were transferred from the central government to municipalities. Provision of compulsory education (elementary and junior high schools) became a municipal responsibility. However, these changes did not occur and become stabilised overnight. Rather, there were a lot of fluctuations. Police affairs, at first transferred to municipalities, were eventually transferred back to the prefectural level. The system of electing the members of Education Boards, created in prefectures and municipalities to take charge of administration in educational affairs, was abolished in 1956 and members were then appointed by the respective chief executive with the consent of the local assembly.
In general, the system was greatly decentralised, then slightly re-centralised and finally stabilised.
The period between 1955 and 1960 was the period when local authorities suffered severely from inadequate revenue. Although the local tax system in Japan was greatly improved and the Local Allocation Tax system was created as a financial support system in the previous period, many local authorities found their revenue totally inadequate to meet the increased demand resulting from their broadened responsibilities. The most fundamental measure taken to deal with this situation was the amalgamation of municipalities. Financial incentives were given and the total number of municipalities decreased from more than ten thousand to a little less than four thousand.
The period between 1960 and 1965 was a period of high economic growth. During this period, the central government tried to undertake most of the increased administrative demand. For this purpose, the central government strengthened its branch offices.
The period after 1965 is when the central government delegated more work to local governments through the “Agency Delegation” scheme. Under Agency Delegation scheme, the actual implementations of duties which essentially belong to the national government were mandated by laws to the chief executives of local governments, that is, governors and mayors. With regard to these duties, a chief executive acts not as an elected administrator whose political base is the resident voters but as an organ of the central government under the instruction of the competent cabinet minister. In other words, once elected as a chief executive of a local authority then that very person automatically become an agent of the central government in majority of the fields of administration.
In 1990s call for more decentralisation was initiated. This series of events toward decentralisation was accelerated by the resolutions passed by both the House of Representatives and the House of Councillors of the Diet in June, 1993. The underlying reasons for this move were the awareness that the current centralised system had become incapable of coping with many newly emerging problems. These circumstances may be summarised as follows:
(1) The present centralised administration system, previously effective in pursuing economic growth, has accumulated institutional fatigue and as a result is unable to meet the present demand for diversified development.
(2) The present centralised administration system cannot deal effectively with new demands such as “adjustment to the changing global society,” “correction of the over-centralisation (of government, business, and population) in Tokyo,” “creation of diversified local communities,” and “ageing population and declining birth-rates.”
Following these resolutions, the Law for Promotion of the Decentralisation was enacted in May, 1995. This law stated as its basic concept that “decentralisation is to be promoted with ‘clarification of the role sharing between the central government and local governments,’ ‘promotion of independence of local authorities’ and ‘realisation of diversified, vigorous local community’ as the basic purposes.” The law obligated the central government to compile the “Decentralisation Promotion Plan.” The law also stipulated the establishment of the “Decentralisation Promotion Commission,” whose responsibility includes submitting recommendations to the Prime Minister with regard to compilation of the “Decentralisation Promotion Plan.” The Commission submitted recommendations in four parts, in December 1996, July 1997, September 1997, and October 1997. The content of these recommendations were highly respected and adopted almost entirely into the “Decentralisation Promotion Plan” announced in May 1998. And most of the Plan’s content found its way into the “Comprehensive Decentralisation Bill,” which was passed in 1999 and put in force, mainly, in April 1, 2000.
One of the most conspicuous changes brought forth by this law was the abolishment of the Agency Delegation Scheme. Most of the formerly delegated functions were then transferred to local governments as their own function, but are still implemented with somewhat larger degree of supervision from the central government than in the case of other functions.
After the turn of the century, it was decided to promote three reforms simultaneously, namely, rationalisation of the Local Allocation Tax, cut on the central government subsidies, and transfer of taxes from the central government to local governments, in order to enhance financial capability of local governments. Under the leadership of Prime Minister Koizumi at that time, these reforms were put forward in the period from FY2004 to FY2006, aiming at the reduction in central government subsidies by 4 trillion yen. This figure was achieved, but instead of the comprehensive abolishment of several schemes of central government subsidies, which had been hoped for, this figure was achieved in considerable part by reducing the percentage of the central government subsidy to the total cost of each project. Naturally, this did not do much good to enhance financial independence of local governments.
Another issue that happened at the same time was municipal merger which was very strongly promoted by the central government.
As a result, the number of municipalities has been greatly reduced and its main driving force seems to be the uneasiness toward their future financial capacity.
Another decentralisation effort was made from 2006, but it was not as drastic as the decentralisation in 2000. The issue of decentralisation again came under attention, when excessive support, coupled with intervention, by the central government to local governments came under criticisms. This time the direction of argument was to make local government have more discretion in discharging their functions and the central government stops to guarantee financial resources to local governments as fully as it does now.
Decentralisation Reform Promotion Law was enacted in December, 2006, and the Decentralisation Reform Promotion Commission was established according to the Law’s provision. The Commission submitted its recommendations to the Prime Minister on 28 May, 2008, 8 December, 2008, 7 October, 2009 and, finally, 9 November, 2009. However, partly because of the change of the government, the result was not as conspicuous as in the last time.
3. Recent Topics in the Field of Local Government in Japan
(1) Appropriateness of present prefectural system
Although the number of municipalities has been reduced from about 15,000 in 1888 to 1,718, the number of prefectures has remained practically the same all through this period. This means that a prefecture contains far less municipalities now and with the development of transport measures, it is not rare for people to commute beyond a prefectural border or borders every day.
Since several years ago, there has been an argument to change prefecture systems. Most of the arguments aim at not just joining them together and making them larger but giving them new characteristics. Some argue that local branch offices of the central government should also be included in the new entities substituting prefectures.
Another trial is being made by prefectures of Kansai Area, which formed a joint entity to implement some of their tasks like disaster prevention, disaster relief, and medical policies jointly.
(2) Introduction of metropolitan government system to Osaka
The former-governor Hashimoto of Osaka Prefecture, who then became the Mayor of Osaka City, advocated application of metropolitan government system, which is in force only in Tokyo Prefecture, to Osaka Prefecture. The scope of argument is being broadened to the question, “what sort of system is best for very large cities.” An act making it possible to introduce a system similar to that in Tokyo in metropolitan areas was enacted in August, 2012. However, the movement toward its application to Osaka area is not supported by all concerned. In February, 2015 both Prefectural Assembly and City Assembly of Osaka approved the new organisation plan and the referendum was held in May 17, 2015. The proposal was turned down by a small margin.
Recently the political party Mr. Hashimoto created, Ishin or Japan Restoration party tried in 2020 for it again but at the referendum on November 11, 2020, the proposition was turned down by a small margin again.
List of Governors (From the HP of the National Governors’ Association)
(As of 3 April, 2022)
List of Prefectural Governors |
|||||
Prefecture |
Name |
Date of birth |
No. of terms |
Latest Election date |
Term of office expires on |
Hokkaido |
Naomichi Suzuki |
Mar-14-1981 |
1 |
Apr-7-2019 |
Apr-22-2023 |
Aomori |
Shingo Mimura |
Apr-16-1956 |
5 |
Jun-2-2019 |
Jun-28-2023 |
Iwate |
Takuya Tasso |
Jun-10-1964 |
4 |
Sep-8-2019 |
Sep-10-2023 |
Miyagi |
Yoshihiro Murai |
Aug-20-1960 |
5 |
Oct-31-2021 |
Nov-20-2025 |
Akita |
Norihisa Satake |
Nov-15-1947 |
4 |
April-4-2021 |
Apr-19-2025 |
Yamagata |
Mieko Yoshimura |
May-18-1951 |
4 |
Jan-24-2021 Election without contest |
Feb-13-2025 |
Fukushima |
Masao Uchibori |
Mar-26-1964 |
2 |
Oct-28-2018 |
Nov-11-2022 |
Ibaraki |
Kazuhiko Ooigawa |
Apr-3-1964 |
2 |
Sep-9-2021 |
Sep-25-2025 |
Tochigi |
Tomikazu Fukuda |
May-21-1953 |
5 |
Nov-15-2020 |
Dec-8-2024 |
Gunma |
Ichita Yamamoto |
Jan-24-1958 |
1 |
Jul-21-2019 |
Jul-27-2023 |
Saitama |
Motohiro Ono |
Nov-12-1963 |
1 |
Aug-25-2019 |
Aug-30-2023 |
Chiba |
Toshihito Kumagai |
Feb-18-1978 |
1 |
Mar-21-2021 |
Apr-4-2025 |
Tokyo |
Yuriko Koike |
Jul-15-1952 |
2 |
Jul-5-2020 |
Jul-30-2024 |
Kanagawa |
Yuji Kuroiwa |
Sep-26-1954 |
3 |
Apr-7-2019 |
Apr-22-2023 |
Niigata |
Hideyo Hanazumi |
May-22-1958 |
1 |
Jun-10-2018 |
Jun-9-2022 |
Toyama |
Hachirou Nitta |
Aug-27-1958 |
1 |
Oct-25-2020 |
Nov-8-2024 |
Ishikawa |
Masanori Tanimoto |
Jul-31-1945 |
7 |
Mar-11-2018 |
7Mar-26-2022 |
Fukui |
Tatsuji Sugimoto |
Jan-2-1962 |
1 |
Apr-7-2019 |
Apr-22-2023 |
Yamanashi |
Kotaro Nagasaki |
Aug-18-1968 |
1 |
Jan-27-2019 |
Feb-16-2023 |
Nagano |
Shuichi Abe |
Dec-21-1960 |
3 |
Aug-5-2018 |
Aug-31-2022 |
Gifu |
Hajime Furuta |
Sep-13-1947 |
5 |
Jan-24-2021 |
Feb-5-2025 |
Shizuoka |
Heita Kawakatsu |
Aug-16-1948 |
4 |
Jun-20-2021 |
Jul-4-2021 |
Aichi |
Hideaki Ohmura |
Mar-9-1960 |
3 |
Feb-3-2019 |
Feb-14-2023 |
Mie |
Katsuyuki Ichimi |
Jan-30-1963 |
1 |
Sep-12-2021 |
Sep-12-2025 |
Shiga |
Taizo Mikazuki |
May-24-1971 |
2 |
Jul-24-2018 |
Jul-19-2022 |
Kyoto |
Takatoshi Nishhiwaki |
Jul-16-1955 |
1 |
Apr-8-2018 |
Apr-15-2022 |
Osaka |
Hirofumi Yoshimura |
Jun-17-1975 |
1 |
Apr-7-2019 |
Apr-6-2023 |
Hyogo |
Motohiko Saito |
Nov-15-1977 |
1 |
Jul-18-2021 |
Jul-31-2025 |
Nara |
Shogo Arai |
Jan-18-1945 |
4 |
Apr-7-2019 |
May-2-2023 |
Wakayama |
Yoshinobu Nisaka |
Oct-2-1950 |
4 |
Nov-25-2018 |
Dec-16-2022 |
Tottori |
Shinji Hirai |
Sep-17-1961 |
4 |
Apr-7-2015 |
Apr-12-2023 |
Shimane |
Tatsuya Maruyama |
Mar-25-1970 |
1 |
Apr-7-2019 |
Apr-29-2023 |
Okayama |
Ryuta Ibaragi |
Jul-29-1966 |
3 |
Oct-25-2020 |
Nov-11-2024 |
Hiroshima |
Hidehiko Yuzaki |
Oct-4-1965 |
4 |
Nov-14-2021 |
Nov-28-2025 |
Yamaguchi |
Tsugumasa Muraoka |
Dec-7-1972 |
3 |
Feb-6-2022 |
Feb-22-2026 |
Tokushima |
Kamon Iizumi |
Jul-29-1960 |
5 |
Apr-7-2019 |
May-17-2023 |
Kagawa |
Keizo Hamada |
Jan-10-1952 |
3 |
Aug-26-2018 |
Sep-4-2022 |
Ehime |
Tokihiro Nakamura |
Jan-25-1960 |
3 |
Nov-18-2018 |
Nov-30-2022 |
Kochi |
Seiji Hamada |
Jan-23-1963 |
1 |
Nov-24-2019 |
Dec-6-2023 |
Fukuoka |
Seitaro Hattori |
Sep-11-1954 |
1 |
Apr-11-2021 |
Apr-10-2025 |
Saga |
Yoshinori Yamaguchi |
Jul-1-1965 |
2 |
Dec-16-2019 |
Jan-10-2023 |
Nagasaki |
Kengo Oishi |
Jul-8-1982 |
1 |
Feb-20-2022 |
Mar-1-2026 |
Kumamoto |
Ikuo Kabashima |
Jan-28-1947 |
4 |
Mar-22-2020 |
Apr-15-2024 |
Oita |
Katsusada Hirose |
Jun-25-1942 |
5 |
Apr-7-2019 |
Apr-27-2023 |
Miyazaki |
Shunji Kouno |
Sep-8-1964 |
3 |
Dec-23-2014 |
Jan-20-2023 |
Kagoshima |
Kouchi Shiota |
Oct-15-1965 |
1 |
Jul-12-2020 |
Jul-27-2024 |
Okinawa |
Denii Tamaki |
Oct-13-1959 |
1 |
Sep-30-2018 |
Sep-29-2022 |
(2) Characteristics of Prefectural Governors
1. Prefectural Official 40 M
2. MP, Town Mayor University of Tokyo (Lit.) 65 M
3. MP, MOFA Official University of Tokyo (Law) 57 M
4. Prefectural Assembly Member, Land Self-defence Force National Defence Academy 61 M
5. City Mayor, Prefectural Official Tohoku University 74 M
6. Administrative Scrivener Ochanomizu University 70 F
7. MIAC Official University of Tokyo (Eco.) 57 M
8. METI Official University of Tokyo (Law) 57 M
9. City Mayor, Prefectural Assembly Member, City Assembly Member, Prefectural Official Nihon University 68 M
10. JICA Official, MP, (Minister of State) Chuo University 64 M
11. MOFA Official, MP Keio University 58 M
12. City Assemblyman, City Mayor Waseda University 44 M
13. MP (Minister of Defence), News Caster University of Cairo 69 F
14. News Caster Waseda University 67 M
15. MOT (Now MLITT) Official University of Tokyo (Law) 63 M
16. President, Gas Company Hitotsubahi University (Eco) 63 M
17. MIAC Official Kyoto University (Law) 76 M
18. MIAC Official University of Tokyo (Law) 59 M
19. MOF Official, MP University of Tokyo (Law) 53 M
20. MIAC Official University of Tokyo (Law) 61 M
21. METI official University of Tokyo (Law) 74 M
22. Chancellor (Shizuoka University of Art and Culture), Professor (Waseda University) Waseda University 73 M
23. MP, MAFF Official University of Tokyo (Law) 61 M
24. MOT (Now MLITT) Official University of Tokyo (Law.) 59 M
25. MP, JR Employee Hitotsubashi University 50 M
26. MOC (Now MLITT ) Official University of Tokyo (Law) 66 M
27. Barrister, City Assembly Member, MP
Kyushu University 46 M
28. MIAC Official University of Tokyo (Eco.) 44 M
29. MP, MOT Official University of Tokyo (Law) 77 M
30. METI Official University of Tokyo (Eco.) 71 M
31. MIAC Official University of Tokyo (Law) 60 M
32. MIAC Official University of Tokyo (Law) 51 M
33. President (Department Store)
University of Tokyo (Tech.) 55 M
34. METI Official University of Tokyo (Law) 56 M
35. MIAC Official University of Tokyo (Eco.) 49 M
36. MIAC Official University of Tokyo (Law) 61 M
37. MOF Official University of Tokyo (Law) 70 M
38. City Mayor, Prefectural Assembly Member, MP Keio University 62 M
39. MIAC Official University of Tokyo (Law) 59 M
40. Prefectural Official Chuo University 67 M
41. MIAC Official University of Tokyo (Law) 56 M
42. Medical Doctor Chiba University (Med.) 39 M
43. Professor (University of Tokyo) Harvard University 75 M
44. METI Official University of Tokyo (Law) 79 M
45. MIAC Official University of Tokyo (Law) 57 M
46. METI Official University of Tokyo (Law) 56 M
47. City
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