Japan | Rural towns luring tax from Tokyo with beef and beer

Want a free case of craft beer? If you send 30,000 yen (USD260) or more of your taxes to the town of Yamanouchi in Nagano prefecture, they’ll send you 24 bottles of a locally brewed beer to say thanks.

Want beef? Redirect 50,000 yen of your local area taxes to Miyakonojo in Miyazaki, and you’ll get 3 kilograms of high-grade beef in return.

This Furusato Nozei (Hometown Tax) system began in 2008 as a way for people to channel part of their taxes to help rural areas struggling with falling populations and shrinking revenues. But its popularity isn’t driven by altruism or nostalgia for the countryside. Belying the program’s name, money can be sent anywhere, and much of it is going to places that offer local produce as gifts in return.

Hokkaido – famed for seafood, dairy, and many other foodstuffs – is one of the prefectures that gains the most.

On the other hand, Tokyo’s Setagaya Ward estimates the system will cost it 1.6 billion yen in tax revenue ($14 million) in the fiscal year through March – enough to build five nursery schools, said Akihiro Sasabe, chief of the policy planning division.

Setagaya, which has almost 900,000 residents and the worst child-care crisis in the nation – with more than 1,000 children on waiting lists – is expected to lose more revenue to Furusato Nozei than any other municipality in Tokyo in this fiscal year.

About all it can offer to attract tax revenue itself are frugal gifts such as museum tickets, which helped it bring in 15.8 million yen last fiscal year, said Sasabe.

By comparison, Miyakonojo has almost 164,000 people and attracted 4.2 billion yen through the system during the same period. That’s the most among the 1,700 or so municipalities in Japan. Its website features beef, pork, chicken, and shochu liquor that you can receive in return for directing tax to the area.

“The main focus is to promote our city,” said Shuichi Nomiyama, an official who runs the city’s tax program. “We only offer gifts made in Miyakonojo, and the local economic impact is big.”

Nomiyama estimates that more than 90 percent of the people taking part have no connection to Miyakonojo. The equivalent of about 70 percent of the revenue from Furusato Nozei is spent promoting the program and buying gifts from local producers, he said.

“We are well aware that part of the tax revenue in urban areas is donated to us,” Nomiyama said, but it has created local jobs and allowed the city to fund dental checkups, children’s centers, and other community programs. “We can only return the favor by doing what we can do locally.”

The rising competition among municipalities has drawn warnings from Internal Affairs Minister Sanae Takaichi. She said in 2015 and again in 2016 that towns shouldn’t solicit tax revenue with gifts, offer cash-like gifts such as shopping vouchers, or reveal the retail price of a gift.

Still, the system more than quadrupled to a record 165 billion yen last fiscal year after the government doubled the amount of local taxes that residents can channel into Furusato Nozei.

And there are now commercial websites that show taxpayers how to shop around “hometowns” all around Japan and maximize the value of “gifts” they get in return. Bloomberg