The annual amount of money collected under Japan's furusato nōzei (hometown tax donation) system is believed to have exceeded ¥1 trillion in the fiscal year from April 2023, marking the first time it has done so, sources said Thursday.
The number of people who received residence tax breaks through the system is also believed to have hit a record high of around 10 million.
The internal affairs ministry will release the results as early as next week after scrutinizing the details, including breakdowns by local governments, the sources said.
Under the system, introduced in fiscal 2008, taxpayers can make donations to local governments of their choice.
The amount of the donation, minus ¥2,000, is deducted from the donor's residence and other taxes the following year.
The annual amount of donations made under the system grew from ¥8.1 billion in fiscal 2008 to ¥965.4 billion in fiscal 2022.
The expansion was driven by a rise in the maximum deductible amount in fiscal 2015 and a race among local governments to offer attractive return gifts.
As the competition to lure donors heated up, however, stricter rules were introduced for the system in June 2019.
In recent years, competition has intensified also among intermediary websites that provide reward points to attract users.
In response, the ministry decided to ban local governments from collecting donations through such websites beginning in October 2025.