Hometown Tax Donation System and Local Governance

As attention to the hometown tax donation system has increased in recent years, it is important for practitioners to gain knowledge on what kinds of local government initiatives attract donations and what effects the system can have on local economies to provide appropriate information for making logical decisions. In this chapter, we examine both qualitatively and quantitatively how the hometown tax donation system, a unique Japanese donation system and one that has been in place for about 15 years, affect local governments. As a quantitative analysis method, we use two estimation models to analyze the relationship between local governments’ efforts and the hometown tax donation system in relation to donation revenues. The results show that donors’ self-interested factors such as financial incentives are statistically positively significant, while most of the altruistic factors are not statistically significant. The quantile regression model results also indicate that the trends are clearly different depending on the amount of donation. Specifically, for municipalities with smaller donation amounts, the positive associations with credit card payments and number of portals are larger. For municipalities with larger donation amounts, the positive associations with higher expense ratios, the number of returned gifts, and the presence of high-value returns of 10 million yen or more are larger. Additionally, a case study of the project ‘Tokusan Doshiyo (What About Our Specialties?) Seminar,’ in which the authors are involved as an academia-industry collaboration, suggests that the hometown tax donation system could contribute to construction of local ecosystems and enhancement of local governance.