Hirado, Japan: Tax breaks come in many forms. Charitable gifts. Health care expenses. Mortgage interest payments. In this small fishing village, they come in a cooler. It is part of the great tax giveaway happening across Japan.
Taxpayers who donate money to Hirado get a nice deduction and a shipment of slipper lobsters, spiral-shelled mollusks and oysters.
Don’t like seafood? Hirado has hundreds of other thank-you gifts, like a monthly vegetable delivery, a fold-up electric bike or a wedding photo shoot with formal wear and hotel stay included.
Donors - 36,000 in one year - now outnumber residents. “I think of them as neo-citizens,” said Hirado’s mayor, Naruhiko Kuroda.
Exploiting a quirk in the country’s tax system, scores of towns with dwindling populations are supplementing revenue by courting outside donors. The result is a sort of adopt-a-forest programme for rural communities - albeit one where the forest reciprocates with gifts.
Local governments are offering things as diverse as marbled Wagyu beef and hot-spring vacations. Last month one city in central Japan, Bizen, attracted 56 million yen (Dh1.7 million) with a deal on tablet computers.
The tablets were available for a donation of 100,000 yen. After the tax rebate, the cost to donors was just 2,000 yen, or about $17.
This year, Japan sweetened the tax benefits. The government views it as a way of addressing stubborn wealth disparities between cities and the countryside.
Critics, though, say the system has come untethered from its initial purpose, which was to allow city dwellers to support their ancestral towns. The system is known as furusato nozei, or “hometown taxation”.
But there is no requirement that donors have any connection to the places and, today, few actually do.
The cost of thank-you gifts is also rising steadily as local governments compete to attract patrons - leaving less to spend on civic projects. Urban areas, where most donors live, end up bearing the cost, according to Takero Doi, a professor at Keio University, since donors’ tax write-offs subtract from other cities’ revenue.
“Ultimately, it’s a zero-sum game,” Doi said.
Playing the game has been a boon for Hirado. The town’s heyday was four centuries ago, when it was a bustling trading hub that drew cloth and silver merchants from as far away as Europe.
Today it has a cluster of aging tourist hotels, built by overly hopeful developers in the 1970s and 1980s, that sit mostly empty. The population has dropped by half since the 1950s.
While Hirado began accepting donations soon after the programme began in 2008, it only recently started to earn serious money. Taking cues from online shopping, it set up a website where donors can choose gifts and a point system to claim rewards. It takes a donation of 10,000 yen, or $84, to get the seafood delivery.
The town earned 1.46 billion yen in donations in its latest fiscal year, which ended in March, or about $12 million - 7 per cent of its annual budget. That was the most of any local government in Japan.
Some taxpayers are enjoying a windfall, too. “My wife saw something about it on TV and said it would be a good way to save on taxes,” said Shigeki Kanamori, a wealthy real estate developer in Tokyo.
Kanamori gave 3 million yen, or $25,000, to a total of about 200 municipalities. In return, he received gifts worth roughly half that amount. Out of pocket, the haul cost him just 2,000 yen, about the price of lunch at a Tokyo restaurant.
“My biggest problem is that my refrigerator’s full,” he said. He has written a book about where to find the best deals.
Kanamori expects to do even better this year. The government doubled the upper limit on tax deductions on April 1, to 20 per cent of the value of the donor’s municipal tax bill. That, combined with increasingly assertive soliciting, could spur a big increase in donations, which hit 14 billion yen nationwide last year, about $113 million.
Some are concerned that the escalating extravagance of the thank-you gifts could hurt public support for the initiative.
“We want this to be a permanent fixture of the tax system, not just a kind of short-lived festival,” said Kuroda, the Hirado mayor. “I’m happy about our success, but I’m also worried.”
Hirado’s gifts cost the city a little less than half the money it receives, Kuroda said. All are from local producers, he said, for an additional economic boost.
But some towns are pouring 70 or 80 per cent of the value of donations back into thank-you gifts, and are less focused on using local goods. The Ministry of Internal Affairs, which supervises local governments, recently issued a directive calling for “self-restraint” in the selection of gifts.
A few towns have opted for whimsy as a way of standing out at lower cost. Higashi Kagawa, on the island of Shikoku, sends donors a selection of exotic beetles. Kuwana, in central Japan, offers a solo ride on a local train.
Corporations have become involved, too. Toyota City, home to the carmaking giant, is luring people with free use of Toyota’s Mirai hydrogen-powered car.
Most donors give a modest amount. Mutsuko and Yuzo Sarashina, a retired couple from Saitama, a suburb of Tokyo, said they recently gave 10,000 yen to the town of Genkai, near Hirado.
The town, in southwestern Saga prefecture, ranked second to Hirado in donations last year, thanks in part to the popularity of its Wagyu beef.
“I had no idea where Saga or Genkai were,” Mutsuko Sarashina said. “I was happy to get such high-quality beef so cheaply, but I also like the idea that my contribution could help a small town in the countryside.”
Defenders of the system say its merits more than make up for its flaws.
Japan’s regions already depend heavily on outside subsidies - like revenue transfers from the central government, farm supports and public spending on rural roads and bridges. Much of the money is opaquely handled and poorly spent, experts say.
In contrast, furusato nozei is more personal and transparent, according to supporters. Recipients provide a list of proposed uses for donors’ money upfront and let them choose which ones to pay for. Hideo Kishimoto, the mayor of Genkai, said the competition it fostered was healthy and was spurring local innovation.
“It’s like crowdfunding,” he said. Popular causes include child care subsidies and computers for local schools.
Takayuki Fukuoka, an asparagus farmer in Hirado, said he was earning about 30 per cent of his income from gift requests. He said he hoped the programme would open farmers’ eyes to new ways of marketing their produce, instead of relying on the monopolistic wholesale system that dominates Japanese agriculture.
“This has been a very closed-off place until now,” he said.
Hirado town officials keep innovating. They are working on a smartphone-based system that would turn reward points into a virtual currency donors could spend at local businesses.
“We know we won’t be on top forever,” said Kuroda. “We have to get people invested in Hirado, and strengthen the Hirado brand.”
