News Archive : Japan Real Estate

Thursday, November 24, 2005

Local Property Tax Revenues To Drop Y420bn In FY06: Government

Thursday, November 24, 2005
Local Property Tax Revenues To Drop Y420bn In FY06: Government

TOKYO (Nikkei)--Revenues from local property taxes will total about 9.53 trillion yen for fiscal 2006, down 420 billion yen from the current year, according to government projections obtained Wednesday by The Nihon Keizai Shimbun.

The Internal Affairs Ministry estimate represents the sum of urban planning taxes and fixed-asset taxes on residential land, both of which are collected by municipalities. The size of the year-on-year decline is second only to the 460 billion yen drop-off in fiscal 2003. While urban land prices are no longer declining in some areas, an upturn in property tax revenues at the local level is expected to take a while longer.

Real estate appraisals, which are used to forecast property tax revenues, will be revised in fiscal 2006 as part of a triennial review process. Land prices continue to fall in many regions outside major urban areas, and the decline in the cost of building materials is lowering the appraisal value of residences. As a result, property owners are projected to pay less in related taxes.

The Internal Affairs Ministry calculates that slumping land prices will account for about 80 billion yen of the revenue decline, with the lower appraisal values reducing revenues by roughly 350 billion yen.

Fixed-asset tax revenues are forecast to decline 360 billion yen to around 8.36 trillion yen, with revenues from city planning taxes -- which are assessed on properties within urban planning zones -- estimated to decline 60 billion yen to about 1.17 trillion yen.

Municipalities collect nearly 20 trillion yen in taxes, with the two property tax categories accounting for about half of the revenue. The decline in land prices has reduced fixed-asset tax revenues by around 1 trillion yen since fiscal 2000. And for the next four to five years, the Internal Affairs Ministry sees lower land prices reducing overall property tax revenues by about 50 billion yen per year.

(The Nihon Keizai Shimbun Thursday morning edition)