Local allocation tax - Chihokoufuzei

Japanese: 地方交付税 - ちほうこうふぜい

One of the local government financial adjustment systems. The various local communities in which local governments are located have different economic strengths. A region's economic strength depends on its economic base in a broad sense, including its natural conditions (such as the presence or absence of natural resources and topography), social conditions (such as the concentration of capital and labor), and historical conditions (whether it is a castle town or not). Local governments in economically powerful areas are blessed with abundant tax sources and therefore have strong financial strength. On the other hand, local governments in other areas have few tax sources and therefore have weak financial strength. If the disparity in financial strength between local governments like this is not adjusted in some way, residents of financially weak local governments will have to put up with a lower level of public services than residents of financially strong local governments.

From the standpoint of local autonomy, it would be ideal for local governments to cover all public services for their residents with their own financial resources. However, in a welfare state like Japan, the provision of a certain level of administrative services throughout the country is considered an essential condition for achieving social fairness. This is the so-called national minimum idea. From this perspective, it is impossible and unrealistic for individual local governments to provide a certain level of public services to local residents using only their own financial resources. This is where the need for a means to correct the disparities in financial strength among local governments, namely a local financial adjustment system, becomes apparent. Currently, the local allocation tax system plays a central role in this regard in Japan.

[Takeshi Okawa and Hiroaki Nakano]

History

Japan's local finance adjustment system began with the Provisional Town and Village Financial Subsidy in 1936 (expanded to the Provisional Local Finance Subsidy the following year in 1937), and was fully established with the distribution tax system within the local allocation tax system established in 1940. (Local allocation taxes consist of refund taxes and distribution taxes. Refund taxes are collected as national taxes (land tax, house tax, and business tax) and the entire amount is returned directly to the prefectures where they are collected, so they do not have a function of financial adjustment.) The distribution taxes divide a certain percentage of income tax, corporation tax, admission tax, and entertainment and restaurant tax into prefectures and municipalities, and allocate half of each in inverse proportion to taxing power (per capita amount of land tax, house tax, business tax, etc.) and the other half in direct proportion to financial needs (surcharge population).

This system continued until fiscal 1949 (Showa 24), but the Shoup Tax Mission, which visited Japan that same year, recommended changing it to an equalization grant system. The reasons given were that the total amount of the distribution tax fluctuated widely and that "there are some arbitrary aspects that do not necessarily reflect the actual financial strength or financial needs of local governments" (for example, the distribution tax is divided equally between prefectures and cities, towns, and villages), and they stated that in the new system, "the total amount of grants must be determined based on rational standards and on a study of the capabilities and needs of local authorities. Distribution to local governments must be made by a method that fully recognizes the difference between capabilities and needs."

Based on these Shoup recommendations, the Local Finance Equalization Grant System was established in 1950. This system was designed to calculate the financial shortfalls of local governments based on objective criteria and to fully compensate for these shortfalls. It was a system that not only rectified the imbalance in financial strength between local governments, but also guaranteed the financial resources to maintain a certain level of administration. However, in actual operation, there was a continuous situation of fierce conflict every year between the Local Finance Committee and the Ministry of Finance (at the time) over the calculation of the financial shortfalls. As a result, the system was reviewed and was replaced by the current Local Allocation Tax System from fiscal 1954. In the new system, the method for determining the total amount of grants was completely changed. However, the distribution method basically follows the method of the Local Finance Equalization Grant.

[Takeshi Okawa and Hiroaki Nakano]

Functions and Mechanisms

Local allocation tax has two functions: a financial adjustment function and a financial resource guarantee function. The financial adjustment function is to correct the uneven distribution of tax sources among local governments and balance financial resources through the appropriate allocation of local allocation tax. The financial resource guarantee function is to guarantee the financial resources necessary for local governments to carry out the tasks and provide a certain level of administrative services prescribed by law. This has two aspects: a financial resource guarantee function in the total amount, so to speak, throughout local finances as a whole, and an individual financial resource guarantee function through the amount of grants to each local government.

Currently, the total amount of local allocation tax is 35.8% of corporate tax, 32% of income tax and liquor tax, 29.5% of consumption tax, and 25% of tobacco tax. Local allocation tax is a general financial resource for local governments that is not restricted in how it is used. Therefore, although it is linked to national taxes, it should be considered to be an indigenous financial resource for local governments.

Local allocation tax is divided into two types: ordinary allocation tax and special allocation tax. In principle, the former amounts to 94% of the total amount and the latter to 6%.

Ordinary local allocation tax is paid to local governments whose standard financial needs exceed their standard financial revenues, i.e., to cover the amount of the excess, i.e., the financial resource shortfall. Under the Local Finance Equalization Grant System, the financial resource shortfall was, in principle, to be compensated for in full, but under the Local Allocation Tax System, the total amount of local allocation tax is set at a certain percentage of the target national tax revenues, so the total amount of the financial resource shortfall may exceed the total amount of ordinary local allocation tax, in which case the amount of the grant to the grant recipient is reduced by that amount. However, if the total amount of ordinary local allocation tax continues to differ significantly from the total amount of the financial resource shortfall, the local administrative and financial system will be revised or the local allocation tax rate will be changed.

Standard financial needs are the general financial resources required for each local government at the standard administrative level. Specifically, they are calculated by adjusting the values of the measurement units set for each type of expense (for example, "population" for "firefighting expenses," "road area" for "operating expenses" in "road and bridge expenses," and "road length" for "investment expenses"), multiplying them by the unit costs for each measurement unit, and adding up the results. Standard financial revenues are the financial strength of each local government, that is, the standard expected revenues from local taxes and local transfer taxes. However, for local taxes, 80% (prefectures) or 75% (municipalities) of the expected revenues are included, and the remaining 20% or 25% is left as reserved resources (also called free resources) for local governments to carry out their own activities.

In the case of Tokyo, the standard financial needs and standard financial revenues are calculated by combining the amount calculated by treating all of its districts as a prefecture with the amount calculated by treating each special ward as a single city, town, and village (Tokyo-Ward Combined Special System). In response to this exception, a Tokyo-Ward Financial Adjustment System has been established between Tokyo and the special wards, and between the special wards themselves.

Special local allocations are provided to compensate for the fact that the calculation of ordinary local allocations is relatively uniform, making it difficult to take into account the special circumstances of each local government, and that factors that arise after the start of a given fiscal year (for example, an increase in financial needs or a decrease in financial revenue due to the occurrence of a disaster) are not reflected in the calculation results.

[Takeshi Okawa and Hiroaki Nakano]

Relationship with local government financial plans

Every year, after the national initial budget is compiled, the local government financial plan for the following fiscal year is submitted to the Diet and published. This is a forecast of the total revenue and expenditure of local governments for the following fiscal year (only the portion corresponding to the general account). However, the amount recorded here is not the total of the actual estimated revenue and expenditure of each local government, but an estimate of the amount of revenue and expenditure at a certain level for all local governments, using a certain method (for example, local tax revenue is estimated using the standard tax rate, and salary expenses are calculated based on the salary level of national civil servants, etc.).

The local government financial plan is prepared, firstly, because when the national government compiles the budget and puts its policies into practice, it becomes necessary to coordinate with local governments (many national policies must be implemented through local governments), and secondly, because it is necessary to guarantee financial resources for local governments as a whole, including the implementation of such national policies at the local level. In other words, the expenditures in the local government financial plan include not only the tasks and projects that local governments are obligated to carry out and the standard tasks and projects that local governments are obligated to carry out, but also the tasks and projects that the national government expects local governments to carry out, and it is important for the national government to guarantee financial resources for these tasks and projects.

During the process of formulating a local finance plan, if it becomes clear that there will be a surplus or deficit (in most cases a deficit) in the forecast for local finances, measures to balance the budget (local finance measures) are considered. Such measures include revising the local tax system, increasing the local allocation tax, and issuing more local bonds. Revisions to the local tax system include the creation of new taxes, the transfer of tax sources from the national government, and raising tax rates. Increases in the local allocation tax are made by adding target tax items, raising the allocation tax rate, borrowing through the local allocation tax special account, and so on. Local bonds are often issued to make up for a shortage in local financial resources, and in such cases, the amount equivalent to the principal and interest repayments is included in the expenditures of the local finance plan at the time of redemption, and financial resources are provided in the form of being included in the standard financial needs amount.

The scale of revenue and expenditure in the local government financial plan for fiscal 2009 is 82.5557 trillion yen, down 845.7 billion yen, or 1.0%, from the previous fiscal year. Based on this scale of revenue and expenditure, the total amount of local allocation tax for the same fiscal year is calculated to be 15.8202 trillion yen, up 2.7% from the previous fiscal year.

Local finances in fiscal 2009 are expected to face a large shortfall in financial resources due to the sharp decline in national tax revenues, which are the source of local tax revenues and local allocation tax, and increases in social welfare expenses and public debt service expenses caused by the economic downturn, and the following two measures have been taken to increase expenditures in the local financial plan. The first is an increase of 1 trillion yen in addition to the existing additions based on the "emergency measures for protecting livelihoods," and the second is a compensation measure of 10.4664 trillion yen to make up for the shortfall in financial resources due to the large decrease in national tax revenues, which are the source of local tax revenues and local allocation tax, expected in fiscal 2009, as well as increases in public debt service expenses and social welfare expenses.

In addition, the actual increase in local allocation tax, including temporary financial measures bonds (deficit local bonds that can be issued individually by local governments), is 20.9688 trillion yen, an increase of 2.7295 trillion yen from the previous fiscal year (an increase of 15% from the previous fiscal year).

[Takeshi Okawa and Hiroaki Nakano]

Recent trends and issues

It can be said that the local allocation tax has achieved its function of adjusting financial resources, which is to ensure that a certain level of administrative services is available in every region of Japan. When we look at the ratio of general financial resources (the total of local taxes, local allocation tax, local transfer tax, etc.) to the total revenues of local governments, there are no longer any major differences between local governments. However, the local allocation tax system faces major functional problems and is being forced to undergo structural reform.

First, the local allocation tax's function of guaranteeing financial resources has become dysfunctional. The severe recession following the collapse of the bubble economy caused a sharp decline in national tax revenues, which are the source of local allocation tax revenues. In addition, local government expenditures increased in succession to stimulate the economy, causing a significant discrepancy between the total amount of local allocation tax and the five statutory taxes, and the shortfall was made up by borrowing from the Local Allocation Tax Special Account. This measure using borrowing was in principle abolished in fiscal 2001, but in fact it continued until fiscal 2004, and since then it has been covered by issuing temporary financial measures bonds, so the dependency on borrowing has not been eliminated. The outstanding borrowing balance in the Local Allocation Tax Special Account stands at 33.6 trillion yen as of the beginning of fiscal 2009.

Second, the expansion of the standard financial needs and its contents. It estimates the costs (general revenue portion) required to carry out the tasks and projects that local governments are obligated to carry out, the standard tasks and projects, and the tasks and projects that the national government expects local governments to carry out. Recently, the demand amount has increased to include projects related to community development and elderly health and welfare, public investment, and economic stimulus projects. Some of these policies require the guarantee of financial resources as part of the work of local governments, but there are also policies that do not require this and policies that aim to implement national policies through local governments. The inclusion of such policies in the standard financial needs may impair the independent financial management of local governments (some policies include the principal and interest redemptions of local bonds, which are used as financial resources, in the standard financial needs to make it easier for local governments to undertake the public investments expected by the national government). It is necessary to reconsider the extent to which the content and level of local administration should be guaranteed by local allocation tax.

Thirdly, we should heed the Shoup recommendation that, although the role of the local allocation tax system in guaranteeing the implementation of a certain level of administrative services for all local governments is important, this role should be kept to a minimum. The recommendation states, "The degree to which equalization grants impair local autonomy will vary depending on the amount of the grant and the degree of dependence of local governments on the grant. It is therefore desirable to limit the grants to a minimum amount consistent with the need for equalization." To achieve this, it is fundamentally necessary to expand the allocation of tax sources to local governments in line with the trend toward decentralization. In that case, we must ensure stable tax sources that are appropriate for local taxes and that are not particularly unevenly distributed in particular areas. At the same time, we must also review the content and level of the standard financial needs amount, as well as the overly complicated calculation method for the local allocation tax.

[Takeshi Okawa and Hiroaki Nakano]

"Local Allocation Tax: Structure and Functions" by Okamoto Zensho (1995, Printing Bureau of the Ministry of Finance)" ▽ "New Theory of Local Financial Adjustment Systems" by Ishihara Nobuo (2000, Gyosei)" ▽ "Local Allocation Tax: What's the Problem? - History and International Comparison of Financial Adjustment Systems" edited by Kamino Naohiko and Ikegami Takehiko (2003, Toyo Keizai Inc.)" ▽ "The Economics of Local Allocation Tax: Reform Based on Theory and Empirical Results" by Akai Nobuo, Sato Kazumitsu, and Yamashita Koji (2003, Yuhikaku)" ▽ "Local Finance: Theory and Issues" by Mizutani Morio et al. (2007, Keiso Shobo)" ▽ "Illustrated Local Finance Data Book, various annual editions edited by Idei Nobuo and the Research Office of the House of Councillors Committee on General Affairs (Gakuyo Shobo)"

Source: Shogakukan Encyclopedia Nipponica About Encyclopedia Nipponica Information | Legend

Japanese:

地方財政調整制度の一つ。地方公共団体が位置しているそれぞれの地域社会は、相互に異なった経済力をもっている。地域の経済力は、その地域の自然的条件（天然資源の有無や地勢など）、社会的条件（資本や労働力の集中の度合いなど）および歴史的条件（城下町か否かなど）など、広い意味の経済基盤に依存する。経済力のある地域の地方公共団体は、豊かな税源に恵まれ、したがって財政力が強い。一方、そうでない地域の地方公共団体は税源に乏しく、したがって財政力が弱い。このように地方団体間に財政力の格差があるのに、それを何らかの手段で調整しなければ、財政力の弱い地方団体の住民は、財政力のある住民に比べて、低い水準の公共サービスに甘んじなければならない。

　地方自治のたてまえからすれば、地方公共団体はそれぞれの独自の財源で、その住民の公共サービスをすべてまかなうのが理想的である。しかし、日本のような福祉国家においては、全国を通じて一定水準の行政サービスを提供することが、社会的公正を達成する上で不可欠の条件とされている。いわゆる、ナショナル・ミニマムの考え方である。このような観点からみれば、個々の地方公共団体がその固有財源だけで、地域住民に一定水準の公共サービスを提供することは不可能だし、また非現実的である。ここに、地方公共団体間の財政力の格差を是正する手段、すなわち地方財政調整制度が必要とされる根拠がみいだされる。現在、日本では地方交付税制度がその中心的な役割を果たしている。

［大川　武・中野博明］

沿革

日本の地方財政調整制度は、1936年（昭和11）の臨時町村財政補給金（翌1937年、臨時地方財政補給金に拡大）に始まり、1940年に創設された地方分与税制度のなかの配付税制度によって本格的な確立をみるに至った（地方分与税は還付税と配付税とからなる。還付税は地租、家屋税、営業税の3税を国税として徴収し、その全額を徴収地である道府県にそのまま還付するものであるから財政調整の機能をもたない）。配付税は、所得税、法人税、入場税、遊興飲食税の一定割合を道府県分と市町村分とに分け、それぞれ2分の1を課税力（地租、家屋税、営業税等の人口1人当り額）に反比例させ、他の2分の1を財政需要（割増人口）に正比例させて配分するというものであった。

　この制度は1949年度（昭和24）まで続いたが、同年来日したシャウプ税制使節団は、これを平衡交付金制度に改めるように勧告した。その理由として、配付税の総額の変動が大きいことや「地方の実際の財政力または財政需要をかならずしも反映しない独断的な面が若干ある」（たとえば、配付税を都道府県と市町村に半分ずつ分けている）ことなどを指摘し、新しい制度では、「交付金の総額は合理的標準の下に地方当局の能力と必要を研究して決定せねばならない。地方への分配は能力と必要の差を十分に認める方式によって行わねばならない」と述べた。

　このシャウプ勧告に基づいて、1950年に地方財政平衡交付金制度が創設された。これは、客観的基準によって地方公共団体の財源不足額を算出し、これを完全に補填(ほてん)しようとするもので、団体間の財政力の不均衡を是正するだけでなく、一定水準の行政を維持するための財源をも保障するという制度であった。しかし、現実の運用においては、毎年、財源不足額の算定をめぐって地方財政委員会と大蔵省（当時）が激しく対立するという状況が続いた。そのため制度の見直しが行われることになり、1954年度から現行の地方交付税制度に改められた。新しい制度では、交付総額の決定方式が全面的に変更された。しかし、配分方式は、基本的には地方財政平衡交付金の方式を踏襲している。

［大川　武・中野博明］

機能と仕組み

地方交付税には財政調整機能と財源保障機能の二つの機能がある。財政調整機能は、地方交付税の適正な配分を通じて地方自治体間の税源の偏在を是正し、財源の均衡化を図ることである。また、財源保障機能は、地方自治体が法令によって定められた事務や一定水準の行政サービスを提供するために必要な財源を保障する機能のことである。これには、地方財政全体を通じてのいわば総額としての財源保障機能と、各地方自治体に対する交付額を通じての個別的財源保障機能という二つの側面がある。

　現在、地方交付税の総額は、法人税の35.8％、所得税と酒税の32％、消費税の29.5％、たばこ税の25％とされている。地方交付税は、地方公共団体にとって使途を制限されない一般財源である。したがって、国税に連結されているとはいえ、その性格は地方公共団体の固有財源であると考えるべきである。

　地方交付税は普通交付税と特別交付税の2種類に区分され、原則として、前者は総額の94％の額、後者は6％の額とされている。

　普通交付税は、基準財政需要額が基準財政収入額を超える地方公共団体に対して、その超える額、すなわち財源不足額に対して交付される。地方財政平衡交付金制度では、たてまえとして財源不足額を全額補填することになっていたが、地方交付税制度では、地方交付税の総額が対象国税の収入額の一定割合となったため、財源不足額の合算額が普通交付税の総額を上回ることもあり、その場合には、その分だけ交付団体への交付額が減額される。ただし、普通交付税の総額が引き続き財源不足額の合算額と著しく異なる場合は、地方行財政制度の改正または交付税率の変更を行うことになっている。

　基準財政需要額とは、各地方公共団体の標準的な行政水準における一般財源所要額のことで、具体的には、経費の種類ごとに定められた測定単位（たとえば、「消防費」の場合は「人口」、「道路橋りょう費」中の「経常経費」の場合は「道路の面積」、「投資的経費」の場合は「道路の延長」）の数値を補正し、これを測定単位ごとの単位費用に乗じて得た額を合算して求める。また、基準財政収入額とは、各地方公共団体の財政力、すなわち地方税や地方譲与税などの標準的な収入見込額である。ただし、地方税については、収入見込額の80％（都道府県）または75％（市町村）が算入され、残りの20％または25％は地方公共団体が独自の活動を行うための留保財源（自由財源ともいう）として残されている。

　なお、東京都の場合は、その全区域を道府県とみなして算定した額と、各特別区を一つの市町村とみなして算定した額との合算額をもって、都の基準財政需要額および基準財政収入額としている（都区合算特例制度）。この特例に対応して、都と特別区および特別区相互間に都区財政調整制度が設けられている。

　特別交付税は、普通交付税の算定がある程度画一的になり、各地方公共団体の特殊事情を十分に配慮できないことや、その年度に入ってから生じた要因（たとえば、災害の発生に伴う財政需要の増大や財政収入の減少）が、算定結果に反映されないことなどを補うために交付される。

［大川　武・中野博明］

地方財政計画との関係

毎年、国の当初予算編成後、翌年度の地方財政計画が国会に提出され公表される。これは、翌年度の地方公共団体の歳入歳出総額（普通会計に相当する部分のみ）の見込みである。ただし、ここに計上される金額は、各地方公共団体の実際の歳入歳出の見込額の合計ではなく、地方公共団体全体について、一定水準での収入支出額を一定の手法で見積もったものである（たとえば地方税収入は標準税率で見込み、給与費は国家公務員の給与水準によって計算するなど）。

　地方財政計画を作成するのは、一つには、国が予算を編成しその施策を具体化するにあたっては地方財政との調整が必要となってくるからであり（国の施策には地方公共団体を通じて行われねばならないものが多い）、第二には、このような国の施策の地方における実施を含めて地方財政全体の財源を保障する必要があるからである。いいかえると、地方財政計画の歳出には、地方公共団体に義務づけられた事務事業や地方公共団体の標準的な事務事業のほか、国が地方公共団体に期待する事務事業が計上されており、これらの事務事業の財源を保障することが国にとっても重要であるからである。

　地方財政計画の策定過程で、地方財政の収支見通しに過不足（多くの場合は不足）が生じることがわかると、収支を均衡させるための方策（地方財政対策）が検討される。その方策としては、地方税制の改正、地方交付税の増額、地方債の増発などがある。地方税制の改正には、新税の創設、国からの税源移譲、税率の引上げなどがある。地方交付税の増額は、対象税目の追加、交付税率の引上げ、交付税特別会計による借入れなどによって行われる。地方財源の不足を補填するために地方債が増発されることも多いが、この場合は、償還時に元利償還金相当額が地方財政計画の歳出に計上され、基準財政需要額に算入されるという形で財源手当がなされる。

　2009年度（平成21）の地方財政計画の歳入歳出規模は、82兆5557億円で、前年度に比べ8457億円、1.0％の減となっている。この歳入歳出規模に基づく同年度の地方交付税の総額は、15兆8202億円（前年度比2.7％増）と算定されている。

　2009年度の地方財政は、景気後退に伴い地方税収入や地方交付税の原資となる国税収入の急激な落ち込みと、社会福祉関係費や公債費の増加によって、大幅な財源不足が見込まれ、次の二つの措置によって、地方財政計画の歳出が増額されることになった。一つは、「生活防衛のための緊急対策」に基づき既定の加算とは別枠で1兆円増額されたこと、二つには、2009年度に見込まれる地方税収入や地方交付税の原資となる国税収入の大幅減収、さらには公債費や社会福祉関係費の増加に伴う財源不足を補うために、10兆4664億円の補填(ほてん)措置がとられたことである。

　なお、臨時財政対策債（地方公共団体が個別に発行できる赤字地方債）を含めた実質的な地方交付税の増額は、前年度に比し2兆7295億円増の20兆9688億円（前年度比15％増）となっている。

［大川　武・中野博明］