Japan High Court Finds State Slashing Izumisano’s Grants Illegal

Osaka, Oct. 9 (Jiji Press)–Osaka High Court on Thursday upheld a lower court ruling that the central government’s decision to cut its special tax grants to Izumisano due to the western Japan city’s huge “furusato nozei” donation revenues was illegal. Presiding Judge Kenji Maki dismissed an appeal by the central government. According to the court ruling and other sources, the city in Osaka Prefecture raised about 49.8 billion yen in donations in fiscal 2018, the largest amount among the local governments in Japan under the furusato nozei hometown donation program. The central government later enforced a revised internal affairs ministry ordinance that takes donation revenues into account in the calculation of special tax grants. Accordingly, special grants to Izumisano in fiscal 2019 were reduced 89 pct from the previous year to about 53 million yen, excluding disaster-related funds. Izumisano filed in 2020 a lawsuit seeking the nullification of the central government’s decision to reduce its special grants to the city. In 2022, Osaka District Court backed the city’s claims, finding the decision illegal. The high court in 2023 overturned the district court’s decision, saying that disputes between administrative entities are not subject to trial, while avoiding a judgment on whether the central government’s decision was legal or illegal. In February this year, the Supreme Court dismissed the 2023 ruling and sent the case back to the high court, finding that it is a dispute over specific rights and obligations and therefore subject to court examination. Maki said the local tax grants law, which stipulates that the amount of special grants is determined by the typical revenue of local governments, does not consider donations as part of the typical revenue. The judge said reducing the grants to the city on the grounds that it earned a certain level of donation revenue goes beyond the scope of authority stated by the law and was, therefore, illegal. If donation revenue is to be used as a factor to reduce special tax grants, a decision needs to be made by the legislature from political and policy perspectives, he said. Izumisano Mayor Hiroyasu Chiyomatsu said that the latest ruling is “significant in terms of rectifying the local tax allocation administration.” He urged the central government to swiftly withdraw the decision to reduce its grants for the city, without challenging the ruling. Internal affairs minister Seiichiro Murakami said that the central government will carefully examine the ruling and consider its next move. The furusato nozei system allows taxpayers to make donations to local governments of their choice and receive tax breaks in return. END [Copyright The Jiji Press, Ltd.]