Abstract
In fiscal year 1998, the national government started a local allocation tax (LAT) cut targeting municipalities with small populations (MSPs). Due to this policy, MSPs' fiscal conditions rapidly became worse and they were forced into considering administrative and financial reforms including mergers.
In this paper, the author surveyed LAT cut policies for MSPs in detail and attempted to explain why LAT cut policies were promoted so strongly, focusing on the actors concerned and relations with municipal merger policies called the Heisei Great Merger.
The findings are summarized as follows.
1) LAT cut policies, MSPs' fiscal conditions, and changes in their fiscal section chiefs' recognition of their fiscal status temporally worked together.
2) In results of weighted regression analysis for standard fiscal demands of MSPs, each parameter changed from increase to decrease in fiscal year 2001. From that fiscal year, the ordinary balance ratios of MSPs started to rise markedly. Therefore, the author concludes that fiscal year 2001 was an important turning point.
3) In 2001, the KOIZUMI Junichiro cabinet was established. This cabinet aimed to make structural reforms in various fields. In such a political situation, the Ministry of Internal Affairs and Communications (MIC) made scapegoats of MSPs for maintaining the framework of the LAT system. Therefore, the MIC spontaneously strengthened LAT cut policies targeting them.
