From today’s Outbox. Only the names have been changed, to protect the guilty.
French Intern J: Did Mr. K really say that “taxing farm zoned land out of existence in the suburbs of urban areas will somehow correct the fiscal imbalance and be a net benefit to Japan's economy”?
Tooth Fairy: Of course not. What he said, or intended to say, or would have said had he listened more carefully to the MOF officials that he talked to was something like this: “Farm zoned land should be taxed at market value like any other commercial real estate. That would raise fixed assets tax revenue for municipalities in urban areas and improve resource allocation. It won’t correct the fiscal imbalance by itself but it’ll help.”
French Intern J: That sounds sensible. Why don’t they do it? After all, there can’t be that many farmers in Metropolitan Tokyo to resist a change in the tax code, no?
Tooth Fairy: It’s more complicated than that. Farmland is governed by the Agricultural Land Act and requires the consent of the local Agricultural Commission and the prefectural governor to be converted to non-farmland. Some of the commissioners are nominated by the local agricultural cooperatives while others are elected by local farmers. The result is an opaque, time-consuming, and often politicized process. You have to flip this entire framework on its back if you are going to start taxing farmland like commercial real estate. The vested interests encrusted around the existing system may not be that large in number, but they’ll fight fiercely to defend their turfs, with a so-far predictable outcome. (You‘ve heard of Mancur Olsen?) If you want to know more, ask Aurelia George Mulgan. Or read her book; Dr. P has a copy. It’s about the size of two bricks and weighs about as much.
French Intern J: Are the taxes so low that the urban and suburban farmers aren’t incented to lobby the national government to change the law so that they can sell their land to real estate developers and make a fortune?
Tooth Fairy: Good question. But beyond the tax incentive that Mr. K talked about, inheritance law offers a huge incentive to the heir(s) to maintain inherited farmland as such until a deal comes along that makes it worthwhile to convert it to residential or commercial use. You have to change that too. Then there are people, including farmers, who’ll see the value of their commercial and residential real estate fall as ex-farmland floods the market. And I haven’t even talked about the externalities, including GHGs.
French Intern J: And you also said that the existing procedures are time-consuming.
Tooth Fairy: Which is why there are many cases reportedly of people just skipping procedures and going ahead and do it. The authorities will not come after minor infractions, and will often legitimize the fait accompli.
French Intern J: It sure is complicated. So Mr. K had all this in mind when he talked about taxes on farmland?
Tooth Fairy: I’m not so sure. You see, Mr. K can’t speak, much less read, Japanese. That means that, for things that English-language information is not available, he is at the mercy of his Japanese interlocutors who speak Japanese. But I don’t fault him for that. In my line of business, I am asked questions that should properly be beyond my ken, and I will be the first to admit that I have winged it, or even dissembled, when I thought that I could get away with it. It comes with the territory, and even academics also do it all the time when they face the TV camera or an op-ed deadline. So now you know where the veal comes from, so to speak. But you do ask good questions. Dr. P should give you a raise.
French Intern J: Mais je n'ai pas encore été payees!
Tooth Fairy: That’s Greek to me.
French Intern J: Actually, it’s French.
Tooth Fairy: Same thing.
French Intern J: I said, I haven’t been paid yet. So, can you do something about that?
Tooth Fairy: Sorry, no can do; I’m the Tooth Fairy, not a debt collector. And I only take baby teeth. Tell you what, I’ll contact Santa Claus; he might be able to help you in…oh, in another six months or so.
French Intern J: Thanks for nothing.
Tooth Fairy: *kids today*