Stuck in the Edo Period: Why the Global Notion of “Taxpayers as Customers” Hasn’t Taken Root in Japan.

“No need to file a tax return, it’s a hassle!”

“We will abolish the year-end tax adjustment and have all citizens file their tax returns.”

Digital Minister Taro Kono was again under fire on social networking sites when he suddenly made this appeal at the announcement of his pledge for the LDP presidential election.

When Finance Minister Shunichi Suzuki said tax payment is at the discretion of lawmakers over the LDP faction’s slush fund case, freelancers and self-employed people posted “#Boycott tax returns” in rapid succession. However, it is probably those who receive salaries from companies, such as company employees, part-timers, and part-time workers, who responded to Minister Kono’s pledge by saying, “Filing income tax returns is such a hassle.

For salaried workers, income tax and resident tax are deducted from their monthly wages and bonuses, and the employer handles the year-end tax adjustment, completing the tax payment process for both income and resident taxes. As a result, most salaried workers do not need to file a tax return themselves.

Thus, salaried workers may find it difficult to be conscious of the taxes they are paying.

 

“Japan is a welfare state, and taxes are the burden that citizens bear to receive social security. However, it is unfortunate that the public’s interest in what taxes they are paying and how those taxes are being used is rather low,” points out Tomoko Hiraishi, a tax accountant and secretary-general of the TC Forum (a group working to establish a taxpayer’s bill of rights). The TC Forum is a voluntary organization formed in 1993 by tax accountants, lawyers, researchers, and small business groups across Japan, and has been working for nearly 30 years to draft a “Taxpayer’s Bill of Rights” to protect taxpayer rights.

Only in Japan is there a year-end adjustment?

Hiraishi continues:

“One reason for the lack of interest is the ‘year-end tax adjustment.’ Under this system, it’s difficult to see how taxes are calculated and how much one is actually paying. I wouldn’t say this applies to all salaried workers, but generally, I feel the level of understanding is low.

However, this is more due to the government, which, when introducing the postwar self-assessment tax system, made it mandatory for employers to handle tax payments and year-end adjustments.”

Is the year-end tax adjustment system something found in other countries?

“I don’t think there are other countries where employers are required to handle year-end tax adjustments for employees, like in Japan.

In Germany, it seems that employers paying more than 10 employees are required to perform year-end adjustments, but I’ve heard that it’s optional and employees can choose not to undergo it.

The U.S. doesn’t have a year-end adjustment system; it’s a self-assessment system. Salaried workers there also file their own tax returns, so I believe their tax awareness is much higher.”