OVERVIEW OF TOKYO

TOKYO'S FINANCIAL SYSTEM

Tokyo's Finances

Revenue

Metropolitan taxes provided for 74.8% of total metropolitan revenue in fiscal 2008. In light of the fact that local taxes accounted for just 44.2% of the total combined revenue of all local governments in fiscal 2007, the significantly large share held by local taxes in Tokyo’s revenues is a major feature of metropolitan finances.

The metropolitan government levies taxes on 16 items among the local taxes shown in the Local Tax System chart. The largest proportion of the total metropolitan tax revenue is held by the two corporate taxes (Corporate Enterprise Tax and Corporate Inhabitant Tax), which together account for approximately 45.0%. This is followed by the Fixed Assets Tax and the City Planning Tax at around 23.2% of total metropolitan tax revenue.

There are several items that are taxed directly by the metropolitan government in the 23 special wards, which in other prefectures would not be levied by the prefectural authority but will come under municipal taxes. This is because Tokyo provides services such as fire fighting and sewerage in the ward area, which would generally be carried out by the municipality. The government thus levies these taxes to allocate funds to pay for this work, with 55% of tax revenue obtained from three taxes— Municipal Inhabitant Tax on Corporations, the Fixed Assets Tax, and the Special Land Ownership Tax— allocated to each of the wards to provide them with their own financial resources.

National treasury disbursements hold a smaller share in overall metropolitan revenue than in that of other local governments. National treasury disbursements accounted for 11.3% of total local government finances, while it accounted for only 5.7% of metropolitan finances.

Metropolitan bonds constitute an important financial resource to develop the infrastructure and for urban renewal. To avoid future increase of financial burdens, the metropolitan government is endeavoring to refrain from any undue reliance upon the flotation of metropolitan bonds, and to contain them to an appropriate degree. Tokyo has also never received any local allocation tax grants designed to compensate the local governments for their shortages in revenue.

Details of Tokyo Metropolitan Government Revenue

Details and Trends of Tokyo Metropolitan Government Revenue

Revenue Breakdown of the Tokyo Metropolitan Government (FY2008 settlement of accounts)

Revenue Breakdown of All Local Governments (FY2007 settlement of accounts)

Local Tax System

Note 1: indicates metropolitan tax Note 2: (Of municipal taxes) those marked with an asterisk are metropolitan taxes in the 23 special wards. Municipal inhabitant tax applying to corporations is imposed as metropolitan tax in the 23 special wards. ● indicates that the tax is not levied in Tokyo Metropolis. Note 3: Accommodation Tax, which is a unique tax levied by the TMG, is a discretionary special-purpose tax. Note 4: Special Land Ownership Tax has been suspended since fiscal 2003.

Breakdown of Estimated Metropolitan Tax Revenue for FY2008 (composition ratio)

Note: Figures shown have been rounded off. The total amount of the estimated tax revenue may not agree with the sum of the individual taxes.

Metropolitan Tax Revenue Trends (total amount, two corporate taxes, fixed assets tax and city planning tax)

*The figures for fiscal 2008 are estimated tax revenues.

Expenditure

The expenditure of the metropolitan government has significant differences from the expenditure of other local authorities. First, the government is responsible not only for the administration at a prefectural level but also for part of the administration in the ward area, which elsewhere would be carried out at the municipal level.

Another important difference is the special ward financial adjustment allocations, an expenditure item found only in Tokyo. The special ward financial adjustment system aims to have financial resources related to the metropolitan administration fairly distributed between the metropolitan government and the 23 special wards, as well as to correct the imbalances between the 23 special wards in fiscal strength and ensure that they can provide an adequate level of public services.

Challenges Facing Metropolitan Finances

As the result of financial reconstruction efforts based on two successive “Fiscal Reconstruction Promotion Plans,” the real account balance has shown a surplus since 2005. This marked a juncture in the financial reconstruction process and the entry into a new stage.

The worldwide financial crisis that started from summer 2008 has, however, led to a large plunge in the nation’s economy. With the possibility of a prolonged economic downturn, the TMG’s fiscal conditions are unlikely to achieve a drastic improvement in the immediate future.

In order to implement mid- to long-term initiatives essential for the future of Tokyo and to deal appropriately with the various challenges facing metropolitan administration, the TMG is making full efforts to implement more efficient and effective policies and programs. While keeping the issuance of metropolitan bonds within bounds and systematically utilizing the fiscal surplus achieved by putting aside funds, the TMG is conducting an even more thorough review of its policies and programs.

Details of Tokyo Metropolitan Government Expenditure (by Purpose)

Details of Tokyo Metropolitan Government Expenditure (by Type)

Details and Trends of Tokyo Metropolitan Government Expenditure

Expenditure Breakdown Comparison

Tokyo Metropolitan Government: FY 2008 Settlement of Accounts All Local Governments: FY2007 Settlement of Accounts

Comparison of Financial Scale with Other Prefectures (FY2009 Initial General Account Budget)