EXCLUSIVE: Japan Eyes Cap on Deductions for “Furusato Nozei” Donations

Tokyo, Dec. 2 (Jiji Press)–The Japanese government and the ruling camp are considering capping the amount of tax deductions allowed under the “furusato nozei” hometown donation system, informed sources told Jiji Press on Tuesday. Under the current system, the amount of donations to local governments minus 2,000 yen is deducted from the donor’s income and residential taxes. Donors can receive return gifts worth up to 30 pct of the donation amount from local governments. Against this background, a ruling party lawmaker said, “It is a tax-saving measure for the wealthy,” arguing that the higher one’s income, the greater the benefits and the more expensive the gifts one can receive. The specific upper limit will be decided in future discussions. The government aims to include the proposed change in its tax system reform package for fiscal 2026. In recent years, some local governments have offered return gifts apparently aimed at high-income individuals, such as a 30-gram gold coin in return for a donation of 5.3 million yen and a voucher for a made-to-measure suit in return for a donation of 37 million yen. Since the system is seen as favorable for higher-income earners, lawmakers of the ruling bloc have called for a review to bring the system back in line with its original purpose. END [Copyright The Jiji Press, Ltd.]