Donations in Japan: Hometown Tax Donation and Reciprocal Gifts

• Main Authors: Hidaka, Yuichiro, Stanislawski, Sumire, Mizukoshi, Kosuke, Ohira, Shuji
• Format: Conference Proceeding
• Language: English
• Subjects: Charities; Donations; Tax deductions; Tax revenues; Taxpayers
• ISSN: 0098-9258

Though Japan has historically had lower rates of charitable giving (Ouchi 2004), it has recently seen an expansion of donations through the introduction of the hometown tax donation system (HTD) by the Japanese government. The HTD allows taxpayers to write off donations to local municipalities as tax deductions based on adjusted income. Municipalities' competition to attract donations led to emphasis on reciprocal gifts, and led to concentration of tax revenue to the most "generous" municipalities with luxurious reciprocal gifts. This trend was criticized as counter to the pro-social origins of the system and mostly benefiting high-income individuals with high deduction limits (Sato 2017). While HTD is a relatively new system for charitable giving in Japan, it has seen wide adoption despite such criticism. This paper aims to further understanding of HTD and consider what drives charitable giving in Japan. Bekkers and Wiepking's 2011 literature review found reputation to be an important mechanism that drives charitable giving where donations lead to social recognition and approval. Donations are perceived to impress others, and visibility tends to increase willingness to donate (Lee et al. 2020; Winterich et al. 2013). Yet, in Japan, there are critical views of publicly "doing good." Activities related to social good are expected to be done in secret under the beauty of a virtue called intoku (literally "hidden good") (Stanislawski et al. 2014). As society expects charitable behavior to be hidden, visible charitable acts can lead to minimal or even negative social reinforcement (Yamamoto and Tanaka 2018). How is HTD influenced by this cultural norm? Costs and benefits were another major mechanism identified by Bekkers and Wiepking (2011). As costs go down (tax deductions) and benefits increase (reciprocal gifts), donations are predicted to increase. Yet, these factors can shift emphasis from giving to exchange, and "crowd out" intrinsic motivations and psychological benefits such as the "warm glow" effect (Andreoni 1989), dampening giving. Indeed, HTD's emphasis on reciprocal gifts has been widely criticized and led to government intervention limiting the value of reciprocal gifts (Hidaka and Mizukoshi 2018). Yet, this system has also been credited for making donations more accessible to the average Japanese as seen through considerable donations collected in response to disasters (The Mainichi 2018). This is significant because individual charitable giving