The Nature of Local Donation System, Between Market Competition and Regulation

Japan representative local donation system "Furusato Nozei (Hometown Tax)" has become entangled in legal disputes related to "point prohibition" regulations. The conflict between platform operators like Rakuten and the Japanese government (Ministry of Internal Affairs and Communications) has intensified, reigniting discussion of the system essence and the paradox of marketization. Important lessons for Korea donation/support systems and regional balance policies. Case overview: July 2025, Japan major IT company Rakuten filed an administrative lawsuit against the Japanese government. The dispute originated from a prohibition order related to "Furusato Nozei" -- Japan government (Ministry of Internal Affairs and Communications) officially prohibited "giving points on intermediary sites when donating to the hometown tax system." This order was implemented from June 2024. How Furusato Nozei works: Japanese residents can "donate" to any local government in Japan and receive tax deductions; in return, donors receive local specialty goods as thank-you gifts; intermediary platforms like Rakuten Furusato Nozei aggregate donation options from thousands of municipalities; platforms had been offering loyalty points as additional incentive for using their service; the Ministry banned this practice arguing it was distorting competition between municipalities (wealthy municipalities with better gift offerings plus platform points creating unfair advantage over rural municipalities). Rakuten lawsuit: Rakuten argues the Ministry prohibition exceeded its legal authority; the point system was a legitimate business practice that helped smaller municipalities attract donors through platform distribution advantages; removing points disadvantages smaller municipalities that relied on platform algorithms for visibility. Lesson for Korea: regional balance policies face the same tension between market efficiency (allowing platforms to compete for donors) and policy objectives (ensuring all regions, not just those with the best products or marketing, benefit from the donation system).