Local Govts Wary of Burden from Refundable Tax Credit Program

Tokyo, May 1 (Jiji Press)–Local governments in Japan are wary of a possible increase in administrative workload resulting from a refundable tax credit program that is being discussed at a nonpartisan forum. While discussions about designing the program, which is aimed at increasing the disposable income of middle- and low-income earners, are underway, a key issue for the National Council on Social Security is how to divide administrative workload between the central and local governments. Considering the cumbersome procedures needed to implement the program, there has been a proposal to limit the measure only to benefits provided by municipal governments for the time being. The central government is eyeing introducing the refundable tax credit program, which combines tax breaks and cash benefits in accordance with taxpayers’ income, following a stopgap measure of reducing the consumption tax rate on food to zero for two years. A panel of experts set up under the council has discussed tasks that would arise if the central government shoulders administrative work related to providing cash benefits. At a panel meeting in late April, the central government estimated that it would take at least two years to establish systems for calculating cash benefit amounts based on residents’ income information held by municipal governments and for paying the benefits into bank accounts that are registered to receive public funds in connection with My Number social security and tax numbers. The central government noted that several more years would be needed to develop full-scale systems that also take into account taxpayers’ financial income and asset information that has not been acquired by the central or local governments. During the panel meeting, many experts called for providing only benefits without coupling them with tax credits. One expert said that it is “realistic” for municipalities to handle the administrative work, given their past experience providing benefits to low-income residents. In 2024, a fixed-amount tax cut of 40,000 yen per person caused a huge administrative burden on local governments, including verifying residents’ income information and reviewing their application documents. Toru Ushikoshi, mayor of the central city of Omachi, Nagano Prefecture, warned, “We hope there won’t be an excessive burden on local governments this time.” Even after the central government establishes systems for the refundable tax credit program in the future, a certain level of administrative burden on municipal governments is seen unavoidable as they need to handle inquiries from residents and process money transfers for residents who have not registered their bank accounts for receiving public funds. It is believed to be important to develop a role-sharing scheme that allows the central and local governments to collaborate smoothly. END [Copyright The Jiji Press, Ltd.]