Revitalizing Local Economies: A Case Of Japan's Furusato Nozei Program And Its Digital Transformation Impact On Tax Decentralization, Economic Growth, And Sustainable Development

Effective fiscal decentralization is crucial to address the issues of development gap and social inequalities and to unlock the benefits of decentralization. Local governments can tailor measures to their needs, stimulating economic growth and prosperity in marginalized communities. This policy brief highlights a unique tax decentralization initiative (Japan’s Furusato Nozei Program), in which taxpayers donate their taxes to local governments through digital platforms (such as the Satofull Website) in exchange for a variety of local offerings provided by participating municipalities. To support the concept of Furusato Nozei Program, the policy briefunderscores the role of digital transformation that contributes to information dissemination, tax payment simplification, and public participation enhancement in the tax decentralization process. These benefits can support local economies and advance all Sustainable Development Goals (SDGs), especially for local governments struggling to generate tax revenue due to depopulation or lack ofmajor industries. G20 countries can develop strategies to leverage digital solutions in revenue mobilization and tax decentralization, including promoting digital tax payment platforms, improving transparency and accountability, and increasing public involvement in local governance. Through collaboration and technological innovation, G20 countries can advocate fiscal decentralization, reduce regional disparities, and promote sustainable development across all regions.