The Ministry of Internal Affairs and Communications announced that the amount of donations to Japan’s Furusato Nozei Revenue from the home tax system rose 16% year-on-year to 1.11 trillion yen in fiscal 2023, hitting a record high for the fourth consecutive year. The number of donations also hit a record high, rising 14% year-on-year to 58.9 million, while the number of donors rose above 10 million for the first time.

The Furusato Nozei The home tax system was introduced in 2008 to balance the difference in tax revenue between urban and rural areas. By donating to municipalities where they do not live, taxpayers can receive deductions from their income and resident taxes of the same amount minus 2,000 yen. Donors also receive special items from municipalities in return for their donations.

After its introduction, the system soon became known as a way to receive special gifts rather than a means of contributing to the financial well-being of local communities. Many recipients of donations offered high-value items such as branded goods. Wagyu Forest or seafood. Portal sites that manage transactions began to award points to attract users, which increased the popularity of Furusato Nozei.

The municipality that received the most donations in fiscal 2023 (19.4 billion yen in total) was Miyakonojō in Miyazaki Prefecture, which provides gifts such as Miyazaki beef and sweet potato shōchū. In second place with 19.2 billion yen was Monbetsu in Hokkaidō, which offers gourmet treats such as crab and salmon roe, followed by Izumisano in Osaka Prefecture, whose items such as processed meat and towels brought the city 17.5 billion yen in donations.

However, the home tax system does not benefit all cities equally. Some municipalities suffer from tax leakage due to the number of residents using the system. Furusato Nozei. The municipality with the largest revenue losses (30.5 billion yen) was Yokohama (Kanagawa Prefecture), followed by Nagoya (Aichi) with 17.7 billion yen, Osaka (Osaka) with 16.7 billion yen, Kawasaki (Kanagawa) with 13.6 billion yen, and Tokyo’s Setagaya with 11.0 billion yen. All of these cities are either designated cities under the Local Autonomy Law or Tokyo municipalities. While their large populations generate a lot of tax revenue, the cities also have large budgets for the many services they provide to their residents, which could be affected by the outflows.

To curb excessive competition, the MIC will ban donations via websites that offer points from October 2025.

(Translated from Japanese. Banner photo © Pixta.)