TOKYO, Dec. 4, 2022—In Japan, once introduced, a tax sticks to you forever, even after your death. The stamp tax is a good example: It was introduced in 1873 (Meiji Year 6) for a specific purpose, which had been achieved a long time ago, but has been in place since then for nearly 150 years surviving occasional debate for repeal.
That this tax stays in place firmly as a permanent tax is raising doubts among interested parties as to whether the tax bureaucracy will lift many sunset taxes – such as the earthquake reconstruction taxes to rebuild areas affected by the March 2011 earthquake and tsunami disaster – when they become due. The prospects are dim.
The Japanese stamp tax, according to the National Tax Administration’s website, was emulated after the 1624 Netherlands stamp tax for revenue collection for the 80-Year War. The Japanese tax was aimed at rebalancing tax burns on farmers, who footed much of the Meiji era government finances, and raising more revenue from merchants.
Munemitsu Mutsu, the Meiji era foreign minister, enforced the tax for the taxpayer rebalancing policy, as well as for authenticating commercial transaction documents by attaching the tax stamp as certified paper by the government. The missions were accomplished a long time ago: Japanese farmers are known to pay less taxes (some say least) than merchants and legal documents are certified and protected by law. But the stamp tax is sticking to the Japanese society like a stubborn adhesive tape.
In an April 20, 2022 editorial, the Asahi newspaper wrote that the NTA slapped 130 million yen ($950,000) tax underreporting to the Familymart retail company for not attaching tax stamps to transaction documents it exchanged with franchisees – most likely for simply forgetting doing so.
While details were not known, one can speculate that the reason why such a simple fault has occurred arises from the digitalization of legal documents: You cannot attach tax stamps to electrons!
In 2020, stamp tax revenues are estimated to be 300 billion yen ($2.6 billion), not a small sum for Japan. But the stamp tax revenue has been decreasing steadily as digitalization develops, and yet, the tax authority nor its big brother, the Ministry of Finance, has dropped zero hint at lifting the tax.
This is worrisome. There are numerous sunset taxes in Japan, and as the stamp tax has become a permanent revenue source, other taxes might stay in place for good.
The earthquake reconstruction tax, which is added on corporate, personal income taxes for up to 25 years, to raise more than 10 trillion yen ($94 billion) might become permanent as the motor vehicle ‘tonnage tax,’ ‘gasoline tax,’ and others already have become so.
What’s mysterious, though, is that even with the reconstruction and motor vehicle taxes, the earthquake-hit areas are not luring back residents and highways, harbors, and reclaimed spaces in the disaster hit areas look more barren and forlorn than ever before, with the number of tourists visiting quite limited. Road signs, guardrails and road paints in rural areas, which are supposed to be financed for refreshing, are rusted or just abandoned.
Where’s the tax money being used?
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Insight Into the Future