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.