This study aims to investigate intracity fiscal transfers from the city
planning areas (CPAs) to outside the city planning areas (non-CPAs) that are
not recorded on the municipal account settlement cards and to estimate the
existence and amount of these transfers. The current location optimization plan
in Japan attempts to realize compact cities by defining residential zones and
urban function zones and by providing preferential tax treatment. Nevertheless,
the location optimization plan does not cover non-CPAs, which means that the
location optimization plan does not function for non-CPAs, and this is
considered a social issue. Non-CPAs have low population density, and based on
previous studies, the fiscal efficiency of non-CPAs is considered low.
Intracity fiscal transfers are probably made from CPAs to non-CPAs, just as
so-called intergovernmental fiscal transfers have a horizontal fiscal adjustment
function. In this study, we refer to this intracity fiscal transfer as stealth
fiscal transfer (SFT). To estimate the SFT, we estimated the average
expenditure function using five-year data from FY1990 to FY2010 and we
simulated the SFT for FY2005 and FY2010 using the estimated average expenditure
function and mesh data. By estimating SFT, the existence and amount of SFT will
be revealed, and as a policy implication, an academic basis for expanding the
scope of the location optimization plan will be derived. The simulation results
showed that CPAs, the payers of SFT, were estimated to have paid a national
weighted average of ￥19,218 per capita in FY2005 and ￥18,360 per capita in
FY2010. Conversely, non-CPA, the recipient of SFT, was estimated to have
received a national weighted average of ￥164,017 per capita in FY2005 and
￥171,360 per capita in FY2010. The total value of SFT in Japan was estimated to
be ￥1,104,830,463,745 in FY2005 and ￥1,062,534,779,839 in FY2010. Although the
location optimization plan is a plan for CPAs, the policy implication derived
from this study is that in the future, the location optimization plan is
expected to cover not only CPAs but also the entire area within a municipality,
including non-CPAs.
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