Photo/Illutration Yasutaka Abe, a lawyer representing Izumisano city in Osaka Prefecture, holds up a banner that says “Victory” at a news conference held in Osaka city on March 10 after the ruling. (Yuto Yoneda)

The Osaka District Court ruled in favor of Izumisano city against the central government over the city’s funding being clawed back because of the high amount it raised through the hometown tax donation program.

Izumisano, which is located in Osaka Prefecture, had argued it was unfair that the government reduced its tax revenue funding allocation by hundreds of millions in yen just because it had attracted a large amount of donations.

Called "furusato nozei," the popular program lets citizens direct some of their residential tax payments toward a local government of their choice. A portion of those payments are returned to them in the form of gifts from the municipalities.

Izumisano became a popular place for people to send their donations because of the wide range of gifts it offers in exchange.

In his March 10 ruling, Presiding Judge Osamu Yamaji accepted the city’s argument and revoked the government’s decision to significantly reduce the payment.

He said the central government did not have the authority to reduce the funding like that under the Local Tax Allocation Law.

According to the ruling, the Ministry of Internal Affairs and Communications had revised an ordinance in 2019 so it could include the donations local authorities receive through the hometown tax donation system in calculating how much funding to give them.

The government collects taxes from people on behalf of prefectures and municipalities and then later transfers money back to local governments, in what are called local tax allocations, to ensure they have the necessary funding.

The government had judged that Izumisano had ample funding because of the flood of donations it gets through the hometown tax system. So, it slashed a special type of local tax allocation for the city in fiscal 2019 to around 53 million yen ($450,000), which is about 440 million yen less than the previous fiscal year.

The judge said the amended ordinance could significantly harm the budgets of local authorities who receive large amounts of donations through the program.

He dismissed the government’s argument that the amended ordinance was intended to correct funding disparities among local authorities and ensure fairness by granting more money to the ones with less available funds.

Hiroyasu Chiyomatsu, the city’s mayor, welcomed the ruling.

“I would like to pay my respects to the sensible decision by the court,” he said. “I hope the ministry will withdraw the illegal ordinance.”

Internal affairs minister Yasushi Kaneko said it is too early to comment on the matter.

“I will consider our response after scrutinizing the ruling and speaking with the relevant ministries and agencies,” he said. 

(This article was written by Yuto Yoneda and Hiroki Koizumi.)

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