City of Izumisano wins lawsuit against central government over special subsidies

The Osaka District Court on Thursday issued a ruling overturning the central government’s decision to drastically cut special tax subsidies for a western Japanese city that raised a huge amount of money under the country’s scheme . furusato nozei hometown donation system.

The city of Izumisano in Osaka Prefecture had sued the state, claiming the ruling was illegal and invalid.

Presiding Judge Osamu Yamaji said the central government‘s decision was “unlawful” because it deviated from the scope of actions permitted under the Local Tax Subsidies Act.

The central government had once excluded Izumisano from the furusato nōzei system, concluding that the city solicited donations in a way that defeated the purpose of the system. The city joined the system after the Supreme Court overturned the state’s decision.

The main issue in the lawsuit brought by the city was the central government‘s discretion over the distribution of the special tax subsidies.

The State argued that it could reduce the amount of subsidies by a global judgment under a relevant order of the Ministry of the Interior, based on the principles of special tax subsidies, the amount of which is modified in such a way flexible depending on the financial situation of each local government. .

The city asserted that income from donations under the furusato nōzei system is not meant to be a factor in a decision to reduce tax subsidies.

Under the furusato nōzei system, people can donate to local governments of their choice and receive tax breaks in return.

Judge Yamaji noted that making a decision on the amount of special tax subsidies amounts to the unilateral exercise of authority by the central government based on its dominant position over local governments.

Under the Local Tax Subsidies Law, special tax revenue subsidies can be reduced when there is a gap between the local government’s financial capacity calculated on the basis of regular revenue and its actual revenue, the judge added. .

“First, the law does not specify donation revenue as a factor allowing a reduction of special grants,” Yamaji said, rejecting the state’s assertion that the amount can be reduced by global judgment.

According to the ruling, special tax subsidies given to Izumisano by the state in fiscal year 2019 were limited to those related to post-disaster reconstruction. As a result, the city received only about 53 million yen in special grants in the year to March 2020, down 440 million yen from the previous year.

Izumisano Mayor Hiroyasu Chiyomatsu said, “The lawsuit was aimed at correcting state administration regarding tax subsidies. I want the central government to quickly withdraw its decision on the significant reduction of the 2019 fiscal year special grants to our city and withdraw the illegal order of the Ministry of Interior, without appealing the court’s decision.

Home Affairs Minister Yasushi Kaneko said: “We will consider our response after reviewing the decision in detail.

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