Property tax is a major tax revenue for municipality governments in Japan. It follows the benefit principle in theory and is regarded as a case of good local tax in the literature on local public finance. The practice of local governments however deviates from the theory of good local tax. Property tax in Japan has the feature of capital tax as is levied on capital equipment such as machine. The capital tax feature works to discourage investment especially for small and medium enterprises with credit constraint. Moreover, there exists favorable tax treatments for small size housing and agricultural land which undermine efficient land usage. In principle, property tax exerts substantial effects on land and urban development. This research, by constructing theoretical models and conducting empirical analysis, addresses the economic consequences of property tax especially on land use and capital investments. We then consider reform of the property tax to enhance regional development as well as to secure local government revenue.
June 27, 2016 - September 30, 2018