～ One Aspect of Japanese Municipal Tax System ～
On April 11th, 2012, the Japanese Ministry of Internal Affairs and Communications (MIC) approved a controversial tax by the City of Izumisano, Osaka.
The city will impose a 100 yen tax on every vehicle which crosses the bridge connecting the mainland to Kansai International Airport (KIA) Island. The tax is in addition to an existing 800 yen toll on the national bridge.
Historically, the bridge was owned by KIA Co., Ltd established by the national government to operate KIA. Although established by the national government, the bridge was privately owned and the city could and did levy a property tax on the bridge. When KIA Ltd, incurred financial difficulties the bridge was sold to the national government in 2009 as a part of financial aid package that kept KIA Ltd solvent.
According to the Local Tax Law, Japanese local governments are not allowed to levy property tax on properties owned by the national government. As a result, the city lost about 800 million yen (US$10M) in annual property tax revenue.
Even before this sale, the city faced its own fiscal difficulties. In 2008, it became clear that the city would require a fiscal rehabilitation plan under the Local Governments’ Fiscal Rehabilitation Act. The city had to find additional revenue as well as cut spending.
In order to justify a new means of raising revenue, the city proposed a tax on automobiles crossing this nationally owned bridge. According to documents filed by the city with MIC, city officials argued for the tax measure stating that the city had built and expanded infrastructure and provided access roads and firefighting services in support of KIA. Therefore the city believed that KIA users should bear some of these costs.
The Ministry of Land, Infrastructure, Transport and Tourism, which is responsible for KIA, opposed the taxation. But according to the Local Tax Law, MIC must approve the establishment of a new municipal tax unless:
the proposed tax is levied on the same subject as other national or local taxes (for example, tax levied on income or fixed properties) and the burden on such tax payers seems unbearable; or
the proposed tax obstructs the distribution of goods; or
the proposed tax is inappropriate from the view point of national economic policy.
Since none of these provisos were met, MIC approved this new tax.
The new tax will generate 300 million yen (US$3.7M) of annual revenue for the city. But considering the strong oppose from people concerned, the MIC issued a “technical advice” requiring the city to reach out and explain to the public the necessity of instituting the tax.
April 13th, 2012
Hotaka Kawasaki, Japan Local Government Center