A Looming Challenge: Is Japan Set to Tax Religious Corporations for Consumption Tax Relief?

The possibility of Prime Minister Takaichi initiating taxation on religious corporations, a move often considered a “taboo,” is generating significant attention on social media. Reports suggest this is being considered as a financial source for zeroing out the consumption tax on food items, leading to a mix of anticipation and apprehension regarding its realization.

Taxation of religious corporations has been discussed multiple times in the past, spurred by incidents such as the Aum Shinrikyo affair in the 1990s and the assassination of former Prime Minister Shinzo Abe in 2022. Recently, a view has emerged in some circles that, with Komeito having hypothetically left the ruling coalition, the political environment is now set for Prime Minister Takaichi to tackle this issue head-on.

Proponents of taxation have presented estimates suggesting that lifting the tax exemption for religious corporations could generate an annual tax revenue of 4 to 5 trillion yen. This has fueled expectations that it could become a significant financial source for consumption tax reduction and defense budget expansion. Voices advocating for fairness are heard, stating, “Even with freedom of religion, tax obligations should be equitable,” and “If even tiny businesses pay taxes, there’s no reason religious corporations shouldn’t.” Many opinions call for stronger taxation, especially on certain new religious organizations believed to possess vast assets and religious groups with political influence. There are also quite a few welcoming voices saying, “It would be amazing if this were realized,” and “The public is waiting.” Furthermore, stern opinions are occasionally seen, suggesting that taxes should be collected from specific sects that continue to spread harmful rumors about Fukushima, and from organizations like the Unification Church.

On the other hand, cautious opinions regarding taxation are also deeply rooted. Many social media users point to the current state of numerous small shrines and temples across the country. These are already struggling financially, and it's not uncommon for priests and Shinto priests to hold other jobs. Concerns are raised that if taxation is introduced, these temples and shrines, which maintain traditional cultural assets, would become unviable, leading to the loss of Japan's traditional culture. Alarm is expressed with statements like, “80% might go out of business,” and “Japan's traditions would cease to exist.” Furthermore, there are observations that monks and Shinto priests already pay income tax, and that taxation in the current climate of declining temple and shrine attendance could actually accelerate the decline of traditional culture.

Specific challenges in realizing taxation include how to define the scope of taxation and how to balance it with freedom of religion. Some proposals have emerged seeking practical ways of taxation, such as introducing progressive taxation based on the size of religious corporations, granting exemptions to facilities registered as designated cultural heritage or world heritage sites, or establishing objective criteria for property taxes. Discussions are needed for a system that can ensure transparency while protecting freedom of religion.

As the LDP's support base includes many influential religious organizations, such as Jinja Honcho (The Association of Shinto Shrines), how far Prime Minister Takaichi can delve into this “taboo” will be a major focus of future political developments. Amidst swirling pros and cons among the public, there is a call for the creation of a system that balances fairness and sustainability.

The context

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