Tax deductions and the myth of the “no-donation culture”

March 8th, 2010 by Philip Brasor & Masako Tsubuku

From heaven Audrey guarantees your donation to UNICEF is tax deductible

From heaven Audrey guarantees that your donation to UNICEF is tax deductible

Around this time of year, letters to the editors sections of the national newspapers are filled with tales of people filing income tax returns and coming away confused. One 65-year-old man wrote to the Asahi Shimbun recently about tax deductions for donations to charities and non-profit organizations. He brought receipts for four donations he made, and the tax office accepted two of them, one for UNICEF and the other for Doctors Without Borders, but rejected the other two, both of which were for contributions he made to local NPOs who worked with homeless people. The letter writer was understandably disappointed and quoted the well-know physician, Dr. Shigeaki Hinohara, who is a strong advocate for a broad and transparent tax deduction system so that Japanese people will contribute more freely.

Japanese people donate about ¥260 billion a year to charities, while Americans donate about ¥20.4 trillion, or 8 times as much. Accordingly, Japan has been called, usually by the Japanese themselves, a “no-donation culture,” which makes it sound as if the very idea of contributing to charities were something they can’t get their heads around. This is a myth, or, at least, a convenient means of explaining the lack of structural encouragement for donations. Almost every day on the news you see people collecting money for immediate, specific needs, like earthquake relief or overseas surgery for some poor sick kid, and people always give, but in those situations we’re talking small change. On a larger level people don’t give because they are not encouraged to do so.

Last month, Prime Minister Hatoyama held a news conference where he announced that he would make it easier for citizens to donate money to worthy NPOs. There are some 39,000 NPOs in Japan, but only 116 of them are recognized by the National Tax Agency. The procedure for receiving tax deductible status from the NTA is apparently quite byzantine. Hatoyama said that he has asked the concerned ministries to come up with a plan by the end of April to broaden rules that will make it possible for people to donate to NPOs. This is all part of his “new public” scheme, which is designed to expand the meaning of “public service” to include citizens who work for the betterment of society.

What’s still frustrating about this plan is that the news reports never clearly state that people will be able to deduct donations from their income tax, only that the “tax privilege system” will be broadened. The implication is that there is still something a little untoward about talking about charitable tax deductions since it suggests that people don’t contribute out of sheer selflessness. Even when donations to charities are eligible for tax deductions, the relevant public relations instruments often don’t mention it, which means people have to ask, and that can be a little embarrassing. But asking is important, since you have to have receipts for your tax records and the organizations don’t always send them to you automatically. Also, tax deductions don’t begin until the donation exceeds ¥5,000.

There is one area of tax deductible charitable contributions that the authorities do publicize enthusiastically, and that’s for furusato kikin, or donations made to local governments. Of course, the central government would like nothing better than for citizens to help local governments since that means Tokyo won’t have to help them as much. And there’s a special space on your income tax return just for this deduction. In fact, you can deduct it twice, once for your national taxes and once for your local tax (juminzei).

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2 Responses

  1. Philip, I’m working as a nonprofit administrator in Japan, so this was really useful information. Thanks a lot! Hope the new public scheme from Hatoyama comes with a more straightforward approach, enabling more grassroots civic engagement for Japanese society. I’m wondering if Japanese society (and government officials) view charity as a form of ‘begging’? and perhaps this mindset has something to do with why they are so hesitant to make the tax system more conducive to giving?

  2. Very interesting article Philip thanks.
    I am working on creating a mobile donation platform for Japanese NPOs.
    For us have a new law that would encourage more citizen to donate would be a very good news even though we would focus on micro donations.

    I want to debunk this “no donation” myth by finding a way to make the donation something that is fun to do, before it’s something considered to be a good action.

    I believe that in order to get more donations, one other way could also to have one member of the family asking personally to the others. Japanese people tend to give more to people they know.

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