5. Tax

a. National tax

Taxes in Japan are currently collected by the national government, metropolitan and prefectural governments, and municipalities. Reflecting these distinctions in the levying body, the tax collected by the government is referred to as ‘national tax’ and that by the metropolitan and prefectural governments and municipalities as ‘local tax’. The various tax items can be grouped, according to differences in the taxation base, into income taxation, consumption taxation, property taxation and so on. Taxes levied on income include income tax and corporate tax, the taxes levied on individuals and corporations respectively. Income taxation includes income taxes related to income from interest, dividends, land transfers and so on, and there is a school of thought that sees these as taxes based on assets and places them in the category of property taxation.

Moving on to consumption taxation, while the category contains an array of taxes, the major one from the point of view of the Japanese public is probably everyday consumption tax. Consumption tax is, with the exception of a few items, an indirect tax with a wide levying base that covers general goods and services. Incidentally, the introduction of consumption tax saw the abolition of certain taxes on goods and services – such as commodity tax and admission tax – which were absorbed into consumption tax. Other taxes classified under consumption taxation include alcohol tax, tobacco tax, gasoline tax and motor vehicle tonnage tax.

Finally, the property taxation category includes inheritance tax, donation tax, stamp duty, and registration licence tax.

b. Local tax

Local taxes are levied first as taxes on income, and there are metropolitan and prefectural resident taxes and municipal resident taxes (generally referred to as ‘resident tax’), and enterprise taxes.

Taxes levied on consumption include vehicle taxes such as motor tax, light motor vehicle tax, and motor vehicle acquisition tax, as well as local consumption tax, which was introduced on 1 April 1997.

Elsewhere, taxes levied on fixed assets include fixed asset tax, urban planning tax, special landholding tax, real estate acquisition tax, and others.

The contents of each type of local tax are prescribed in Japan’s Local Tax Law, and the taxes are usually levied according to standard tax rates. Nonetheless, it is possible for municipalities to set certain taxes within the limited rate of taxation.

At this point it is appropriate to add a brief explanation of the local allocation tax and the local transfer tax, through both of which the municipalities use a portion of national tax income. The local allocation tax transfers to municipalities a certain fraction of income, corporate and consumption taxes, the amount corresponding to their financial capability; the local transfer tax transfers taxes such as local road tax and petroleum gas tax to municipalities, according to an objective criterion.


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