Key Facts
• October 9, 2025: Osaka High Court ruled in favor of Izumisano City.
• Court upheld the March 2022 ruling, declaring tax reduction illegal.
• Izumisano City collected ¥49.7 billion in donations in 2018 via the hometown tax program.
• Ministry of Internal Affairs reduced special allocation tax by ¥440 million in 2019.
• Reduction was based on a 2019 ordinance change to include donation revenue.
• Special allocation tax supports municipalities facing financial shortfalls, such as disaster recovery.
• Supreme Court in February 2025 ruled disputes over special allocation tax are subject to litigation.
• Government argued reduction aligned with fair resource distribution among municipalities.
• High Court dismissed the government’s appeal, citing overreach of legal boundaries.
Summary
The Osaka High Court ruled on October 9, 2025, that the Japanese government’s reduction of Izumisano City’s special allocation tax was illegal. The city, which raised ¥49.7 billion in 2018 through the hometown tax program, faced a ¥440 million reduction in 2019 after the Ministry of Internal Affairs revised its ordinance to include donation revenue in tax calculations. The court upheld a 2022 lower court decision, stating the reduction exceeded legal limits. The government argued the measure ensured fair resource distribution, but the court dismissed this claim. The Supreme Court had earlier determined such disputes could be litigated, leading to this final ruling. This decision underscores the legal boundaries of tax adjustments and the autonomy of municipalities.
