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CHAPTER 5 PUBLIC FINANCE
This chapter covers national finance and local finance.
The section of national finance contains statistics on the revenue and expenditure of general accounts, special accounts and government-affiliated agencies, national taxes, government bonds, fiscal investment and loans, treasury accounts, and national properties. The principal sources of these data are "Budgetary Statistics", "Annual Report of Government Bonds" and "Monthly Statistics of Government Finance and Banking" compiled by the Ministry of Finance, "Annual Statistical Report of the National Tax Agency", "Report on the Survey of Wages and Salaries at Private Firms" and "Sampling Survey on Corporations" by the National Tax Agency.
The section of local finance contains statistics on revenue and expenditure of ordinary accounts and public enterprises accounts, local taxes, local allocation taxes, local debt, local finance plans, and administrative investments. The principal sources of data are "Annual Statistical Report on Local Government Finance", "Situation of Local Government Finance" and "Report on Administrative Investments" compiled by the Ministry of Internal Affairs and Communications.
Revenue and expenditure of public finance
Public finance refers to economic activities of the national government and local public bodies which raise financial resources by taxation, public debt, etc. and manage them and defray necessary expenses in order to satisfy public needs. It is classified either as national finance or local finance according to the bodies.
All the activities of public finance are carried out based on a budget. Budget is a programme of public finance activities for the fiscal year, for which a final approval must be given by the Diet or local assemblies. It represents estimates for all the revenue and expenditure of the national government or local public bodies. Original budget or main budget represents the basic budget approved at the outset, while supplementary budget supplements or modifies the original budget according to changes in situation. When the supplementary budget is approved, the amount of this budget in addition to the original budget is executed in the fiscal year. In this case, the sum is called after-supplementary budget. In this Yearbook, unless otherwise specified, a budget refers to this final after-supplementary budget.
When the execution of the budget is completed, a settlement is made according to prescribed procedures. After the auditing by the Board of Audit or after the examination by the inspection commissioner, the settlement is submitted to the Diet or the local assemblies. The amount of settlement relates to the revenue after receipt and the expenditure after disbursement.
Data are based on "Budgetary Statistics" and "Monthly Statistics of Government Finance and Banking (Special Issue on Budget)", in which the Ministry of Finance compiles the budget and settlement figures for every fiscal year.
Accounts of the national government are classified into the general accounts and the special accounts, and the budget is prepared according to this classification. In addition, accounts are also compiled for government-affiliated agencies, and the budgets of these three categories are presented together to the Diet.
The general accounts take in financial resources such as taxes etc., and defray fundamental expenses of the nation such as education, social security, national defense, public works, etc. The special accounts are established by specific laws, only in the case where <1> government special undertakings are conducted, <2> special funds are created and put under management, and <3> special revenues are allocated for special expenditures and their accounts call for a distinction from the revenue and expenditure of the general accounts. The number of special accounts totals 14 as of fiscal 2015. Government-affiliated agencies refer to special corporations which are financed in full by the national government. They are characterised by their public nature, and their budgets are subject to the Diet's resolution.
Data are obtained from "Annual Statistical Report on Local Government Finance" compiled by the Ministry of Internal Affairs and Communications, mainly based on the settlement reports submitted by local public bodies.
Local finance is a generic term covering the public finance of prefectures, shi (cities), machi (towns), mura (villages), special wards and sectional clerical works cooperatives. As in the national finance, the accounts of local governments are classified into the general accounts and the special accounts, the latter of which vary in its scope, depending on the bodies. Therefore, to secure standardisation in the tabulation of local finance, the accounts are classified into the public enterprises accounts and the ordinary accounts which gather other accounts comprehensively, regardless of distinction between the general accounts and the special accounts.
Apart from budget and settlement, the national government prepares every fiscal year the Local Finance Plan which is compiled in the form of net total of the projected revenue and expenditure of local governments, and presents it to the Diet. This plan, which is made in order to review the system of taxes and public finance and to secure the conformity with the national finance and the national economy, serves as a guidebook for the compilation of the budget of local governments.
Further, individual accounts are mutually dependent on each other in complicated ways, resulting in duplicate accounts both for the revenue and the expenditure. Therefore, to grasp the whole picture of finance, it is necessary to see net accounts eliminating duplications. Thus, the net accounts are prepared across the national and local finances and across the governments and the government affiliated bodies.
Taxes are collected by the national government and local public bodies in conformity with laws in order to obtain financial resources for providing public services without quid pro quo for the specified benefits. They are classified either as national taxes or local taxes according to the collecting bodies of tax. Taxes are most commonly classified into direct taxes and indirect taxes. The direct taxes comprise income tax, corporation tax, etc. of which taxpayers and tax-burdeners are identical, whereas the indirect taxes consist of liquor tax, consumption tax, etc. of which taxpayers and tax-burdeners are not identical. In addition, there are distinctions between ordinary taxes appropriated for general financial resources and special purpose taxes appropriated for special financial resources such as city planning tax, etc.
The sources of data are the above-mentioned "Budgetary Statistics" compiled by the Ministry of Finance, "Annual Statistical Report of the National Tax Agency", "Report on the Survey of Wages and Salaries at Private Firms" and "Sampling Survey on Corporations" compiled by the National Tax Agency.
Statistical surveys on taxation conducted by the National Tax Agency are composed of general survey and special surveys. The former is primarily derived from the routine business activities at the tax offices, on a complete count basis in principle, while the latter consists of the following sampling surveys: Sampling Survey on Self-Assessed Income Taxes, Sampling Survey of Wages and Salaries at Private Firms and Sampling Survey on Corporations. The Sampling Survey on Self-Assessed Income Taxes and the Sampling Survey on Corporations are conducted by the tax offices, while the Sampling Survey of Wages and Salaries at Private Firms is conducted as a mailing survey covering withholding agents.
Data are based on the above-mentioned "Annual Statistical Report on Local Government Finance". The statistics represent mainly the amount of settlement and taxes are the amount actually collected.
Local taxes are classified either as prefectural taxes or shi (cities), machi (towns) and mura (villages) taxes. As for the general financial resources of local public bodies, there are, in addition to local taxes, local allocation tax, local transferred tax and special grants to local governments from the national government. The local allocation tax refers to tax allocated to local governments at a fixed rate from among taxes collected by the national government as income tax, corporation tax and liquor tax, etc. Depending on the financial condition of local governments, more allocation tax is granted of local governments have less tax revenue, in order to adjust financial resources between local public bodies. The local transferred tax is a tax collected by the national government as a national tax such as the local gasoline tax and the special tonnage tax, a part or all of which is then transferred to the local governments. The special grants to local governments, which are transferred from the Government to local public bodies, were created in fiscal 1999 to compensate the loss of local tax revenue due to the permanent tax reduction programme.
Public debt refers to obligation owed by the national government or local public bodies by means of issuing bonds or deeds of borrowing in order to cover the shortage in financial revenue, and is distinguished from other borrowings. The public debt is classified into government bonds and local debts, according to the issuer.
The source of data is "Annual Report of Government Bonds" compiled by the Ministry of Finance.
Government bonds are issued on the basis of the law, and may be broadly divided into "general bond" and "financial investment and loans programme bond". The source of repayment and payment of interest of the "general bond" is principally the tax revenue. The "general bond" comprises "new financing bond" and "renewal bond". The "new financing bond", which may be subdivided into the "construction bond" and "extraordinary bond (deficit financing bond)", is issued in the general account and the revenue from its sale forms a part of revenue of the general account. On the other hand, the "renewal bond" is issued in the special account of fund for government bond settling and the revenue from its sale forms a part of revenue of the special account. The "financial investment and loans programme bond" is issued to raise the fund for fiscal investment and loans and the revenue from its sales form a part of revenue of the special account of fiscal investment and loans programme fund. The difference of this bond from the "general bond" is that the source of repayment and payment of interest is principally the recovery of loans from independent administrative agencies, etc., and does not rely on the future tax revenue unlike the "construction bond" or "extraordinary bond". The government bonds are also classified into "revenue bond (ordinary bond)", "bond for postponing expenditure" and "bond for cash management" by purpose. The "bond for postponing expenditure" comprises "bond for grant" and "bond for investment and contribution". The "bond for cash management" is called as "financing bill (FB)" and "treasury financing bill", "foreign exchange fund financing bill", "petroleum bill" and "food financing bill", etc. are currently issued.
Data are based on the above-mentioned "Annual Statistical Report on Local Government Finance" compiled by the Ministry of Internal Affairs and Communications.
The expenses financed by local bonds are limited to those needed for public enterprises, investments and loans, conversion of local bonds, expenses for disaster relief, and expenses for construction of public facilities, etc., and for the issuance of the bonds, it is required as a rule to consult the Minister for Internal Affairs and Communications or the governor of the prefecture. The source of the funds may be classified in public (fiscal loans fund, fund of Japan Finance Corporation for Municipalities) and private (fund from the open market, fund of banks, etc.). Undertakings to be financed by the general account bond may be general public works, educational or welfare facilities improvement, remote or depopulated area development, etc. and those financed by the public enterprise bond may be water works, transport works, hospital and care services, etc. Accounts financed by bonds are ordinary account and public enterprise accounts, where the ordinary account is the sum of general account and special accounts except public enterprise accounts less transfer of fund among those accounts.
Fiscal investment and loans
Data are derived from "Monthly Statistics of Government Finance and Banking (Special Issue on National Investments and Loans)" compiled by the Ministry of Finance.
"Fiscal investment and loans" is a general term covering the supply and delivery of financial resources. More specifically, the financial resources are provided by government loans, government funds for industrial investments and private funds with a government guarantee, while these resources are delivered to the special account of the national budget, Incorporated Administrative Agency, private business sectors through the government finance corporations (koko), local governments and the special joint-stock companies (tokushu kaisha). Therefore, the fiscal investment and loan plan is a delivery plan of these specific financial resources to the destinations mentioned above, but does not show the whole financial plans of the organs receiving these financial resources nor the total amount of the government loans and investments. However, the fiscal investment and loans occupy a considerable weight in the financial activities of the nation together with the national budget, so that it is required to submit the plan to the Diet and get its approval.
Receipts and payments of the treasury funds with the private sector
The source of the statistics is the special issue of the "Ministry of Finance Statistics Monthly" featuring "National Treasury Balance" published by the Ministry of Finance every year.
"Receipts and payments of the treasury funds with the private sector" is based on the "national treasury balance with the private sector", which may cause fluctuations of the money supply, and adjusted as follows. Firstly, adjustment is made for the time lag (caused by the deposits of the agents, etc.) between the actual receipts or payments of cash in the national treasury against the private sector and the listing of the corresponding transactions on the national treasury balance. Secondly, added are the receipts and payments of the organisations, such as the Development of Japan, whose cash has similar characteristics as the cash in the national treasury.
Thereby, the "Receipts and payments of the treasury funds with the private sector" covers all the receipts and payments with the private sector and clarify their influence on the fluctuation of money supply.
National properties are those as prescribed by the National Property Act. As a rule, they are registered in the national property ledger, but the following properties are treated as exceptions and excluded from the registration: <1> properties for public use such as roads, rivers, beaches, etc., other than parks and open spaces, and <2> ordinary properties belonging to the general account, those let out for the use of prefectural roads or shi (cities), machi (towns) and mura (villages) roads.
In principle, national properties are registered in the ledger based on their acquisition prices, but these values (except for properties designated by the Minister of Finance) are revised every fiscal year in order to keep up with fluctuations in prices, etc.
Data are based on "Report on Administrative Investments" compiled annually by the Ministry of Internal Affairs and Communications. Survey on the investments to undertakings of the national government and incorporated administrative agencies is entrusted to the respective ministries concerned, and the survey on the investments to undertakings of prefectures, shi (cities), machi (towns) and mura (villages) is conducted by the Ministry of Internal Affairs and Communications as the Survey of Local Finance and the Survey of Settlement of Local Public Enterprises.
The business units covered by these surveys are, in principle, those related to the gross public fixed capital formation in the system of national accounts (see "3 National Accounts"), excluding: <1> special joint-stock companies, authorised corporations, etc.; <2> incorporated administrative agencies except Forestry and Forest Products Research Institute, Japan Railway Construction, Transport and Technology Agency, Japan Water Agency, Urban Renaissance Agency; <3> financial wards, local development corporations, port authorities, local housing supply corporations, land development corporations and local road corporations related to local governments.
The amount of investments is based on the expenditure settlement, and covers expenditures on: Improvement projects (including cost of land and compensation); the maintenance and repair of facilities (including personnel expenses, travel expenses, equipment expenses, etc.); and planning and surveys.