If you’re not a full-time regular company employee or a civil servant or a pensioner, then this month you will receive a notice from your local government informing you of how much local taxes (shiminzei, tominzei, kuminzei, kenminzei, etc.) you owe them. If you are a full-time regular company employee or a civil servant or a pensioner, then your local taxes, calculated from how much income you made last year, is divided by 12 and subtracted from your monthly pay for the next year. This fact of Japanese civic life often comes as a shock to new company workers, who don’t pay any local tax their first year and then suddenly get socked with these taxes starting the second year of employment. Also, when full-time workers quit their companies they usually receive a notice in the mail telling them to immediately pay their local tax.
I can’t find any statistics for how many of these people do pay immediately, but in the case of foreign workers, who may be going back to their home countries, I’ve heard local governments lose a lot of money because it’s impossible to follow up on foreign scofflaws, unless they decide to return at a later date, at which point they may be waiting for them.
In some cases local taxes amount to more than income taxes. The lowest income tax bracket is 5 percent, but the average local tax is 10 percent (usually 4 percent prefectural plus 6 percent city, town, village or ward). I am self-employed and what with business expenses I usually pay at least twice as much local tax as I pay income tax, which means the notice that arrives in May can be quite a downer, especially since it comes at around the same time that the bill for my next year’s national health insurance — also calculated based on my income tax return — arrives as well.
In almost all cases, employers take care of the paperwork for their full-time employees, but everyone else has to do it themselves, which is why local governments tend toward a carrot-and-stick approach to make sure people pay. In the past, some local governments reportedly offered a slight discount if you paid everything right away.
However, many people don’t save enough money during the year to be able to pay all at once, so they take the option of paying in four installments: June, August, October and January. Since convenience stores don’t accept local tax payments, you have three options: pay at the post office, pay at a bank or pay at your local government office. All those places are only open during normal business hours, which means working people have to take time off to do it. So more and more local governments are encouraging people to set up automatic withdrawals from their bank accounts. Such a system not only is more convenient for the person, but also guarantees that the local government gets paid, as long as there’s enough money in the account when the withdrawal is scheduled. My local government, which happens to be Arakawa Ward, even offers an incentive: hijiki seaweed, nori (laver), rice or dried fish seasoning to 300 people who sign up for automatic withdrawals and are chosen at random.