The internal affairs ministry said Tuesday it will prohibit local governments from soliciting money through the furusato nо̄zei (hometown tax donation) system using intermediate websites that give reward points to users.
In response to intensifying competition among those sites, the ministry will put the measure into force in October next year. Donations collected via the sites will no longer be tax deductible under the hometown tax system.
But points given through ordinary commercial transactions, such as credit card payments, will not be barred from the system, the ministry added.
As the intermediate sites' points are believed to be partially funded by commissions paid by local governments to the site operators, banning the points is expected to result in a relative increase in those governments' income, a ministry official said.
Japan changed the hometown tax system in 2019 to cover only local governments that limit return gifts for donations to local products worth 30% or less of the donated amount. Donation-soliciting costs, including the commissions, are capped at 50% of the amount donated.
According to the ministry, furusato nōzei donations totaled ¥965.4 billion in the fiscal year through March 2023, setting a record for the third consecutive year.