The Rural Tax Problem in Modern Japan. A Review of Burden Estimates

This paper discusses taxation in interwar Japan from the standpoint of rural–urban inequality, in order to assess whether fiscal extraction had a significantly negative impact on the economy of farmers. The first part reviews macroeconomic estimates on the distribution of the tax burden by either productive sector or territory, pointing to the limits of these approaches. The paper then turns to the analysis of sample surveys conducted in the 1910s–1930s, which provide information on both the horizontal and the vertical structure of the burden. Data show that taxes relevant to farmers were relatively inelastic with income and drained a large share of household surplus until the early 1930s. This problem, however, was primarily the consequence of low returns in agriculture and lost importance in the latter half of the decade, when economic recovery enhanced the effectiveness of fiscal reform.