Japan to Review “Furusato Nozei” Hometown Donation System

September 11, 2018

Tokyo- Japan's internal affairs ministry said Tuesday it is considering reviewing the country's "furusato nozei" hometown donation system as some municipalities are not following its guidelines.

Specifically, donations to municipalities failing to follow the guidelines are no longer expected to qualify for tax deductions under the system.

The ministry aims to submit legislation to revise the local tax law to parliament early next year to put the change into effect as early as April.

The guidelines call for limiting the costs to procure return gifts for donors to up to 30 pct of the donated amount and selecting such rewards only from local goodies.

The ministry, releasing the results of its survey as of Sept. 1, said 246 municipalities gave rewards equivalent to over 30 pct of the donated amount and that 190 municipalities gave rewards that are not local goodies.

Under the system, people who make donations to municipalities and prefectures of their choice are eligible for deductions on their income and residential taxes, after subtracting 2,000 yen from the amounts they donate.

The donors also receive rewards from the recipient local governments. Some municipalities are racing to offer expensive gifts to lure more donors, drawing criticism for undermining the system's purpose of supporting local communities. Jiji Press