3.4. Number of ancestors and evaluation value of forest property

Table 4 summarizes the land characteristics of all properties in 2014. In 2014, there were 56,329 ancestors, and 93% (52,327) of ancestors had land property. The inheritance tax is necessary in cases when the total evaluation of properties exceeds the value of several exemptions. However, the inheritance tax tends to be applicable when there is land included as property.

Of the 52,327 ancestors with land property, 51,513 cases included housing land, meaning that in most cases, including forest land, the land property included housing land. This is in agreement with the results of the 2013 Housing and Land Statistics conducted by the Statistics Bureau of the Ministry of Internal Affairs and Communications, which estimated that 2,673,000 households owned forest land, of which 2,569,400 households (96.1%) had their own house. Therefore, only a small percentage of cases included inherited land property that was only forest land.

In total, 20.9% of ancestors had land properties that included forest land. However, these properties only accounted for 1.4% of the total value of properties. The average value of forest land per ancestor was 6.8 million yen, much less than the values of housing land, farmland, and rice fields.

Figure 3 shows the number of ancestors with property that included forested land and the value of forest land per ancestor from 1988 to 2014.

About 10,000 inheritances that included forested land were required to pay inheritance tax. The evaluated value of forest land per inheritance has decreased since 1992. For example, when the value in 1992 is fixed to 100, the value in 2014 is 17.4. The reason for this decrease is the decrease in the value of forest land, since the values of both forest land and housing land have decreased. Figure 4 shows the number of ancestors and value of housing land. The pattern of the graph is similar to that of forest land, and when the peak value in 1992 is fixed to 100, the value in 2014 is 36.1.


Figure 5 shows the number of ancestors and value of the inherited property when only standing trees are considered and forest land is excluded, both of which are decreasing.

Figure 4. Number of ancestors and value of housing land. Source: National Tax Agency Annual Statistics Report.

Figure 3. Number of ancestors and value of forest land. Source: National Tax Agency Annual Statistics Report.

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The value of forest land per ancestor has decreased since 1992 (Figure 3). The value in the peak year (1992) was 39 million yen, which decreased to 6.8 million yen in 2014. The reason for this decrease is a decrease in the standard value at the standard final cutting age due to decreases

The stumpage prices of C. japonica and C. obtusa peaked in 1980, and have been decreasing since. Setting the stumpage price in 1980 to 100, the stumpage price in 2016 was 12.3 for C. japonica and 14.4 for C. obtusa. Compared to the stumpage prices in 1960, 7,148 yen and 7,966 yen for C. japonica and C. obtusa, respectively, the stumpage prices in 2016 were 39.2 and 77.2% of those in 1960, respectively. Since this represents the nominal price, a long-term increase in prices should be considered. Using the Corporate Goods Price Index of 2005 by the Bank of Japan, the index was 50.8 and 105.0 in 1960 and 2011, respectively. Using the Consumer Price Index of 2010 by the

3.5. Decrease in the value of forest and stumpage price

in both forest land and stumpage prices (Figure 6).

Source: National Tax Agency Annual Statistics Report.

Note: The total of number of ancestors is the actual number of ancestors. In cases of rice fields and farmland, cultivation rights and perennial tenant rights are included. In the case of housing land, leaseholding is included.

Table 4. Land property in 2014.

Figure 3. Number of ancestors and value of forest land. Source: National Tax Agency Annual Statistics Report.

Figure 4. Number of ancestors and value of housing land. Source: National Tax Agency Annual Statistics Report.

Figure 5 shows the number of ancestors and value of the inherited property when only standing trees are considered and forest land is excluded, both of which are decreasing.

#### 3.5. Decrease in the value of forest and stumpage price

3.4. Number of ancestors and evaluation value of forest property

value of forest land per ancestor from 1988 to 2014.

to 100, the value in 2014 is 36.1.

Source: National Tax Agency Annual Statistics Report.

Table 4. Land property in 2014.

and rice fields.

166 Taxes and Taxation Trends

Table 4 summarizes the land characteristics of all properties in 2014. In 2014, there were 56,329 ancestors, and 93% (52,327) of ancestors had land property. The inheritance tax is necessary in cases when the total evaluation of properties exceeds the value of several exemptions. However, the inheritance tax tends to be applicable when there is land included as property.

Of the 52,327 ancestors with land property, 51,513 cases included housing land, meaning that in most cases, including forest land, the land property included housing land. This is in agreement with the results of the 2013 Housing and Land Statistics conducted by the Statistics Bureau of the Ministry of Internal Affairs and Communications, which estimated that 2,673,000 households owned forest land, of which 2,569,400 households (96.1%) had their own house. Therefore, only

In total, 20.9% of ancestors had land properties that included forest land. However, these properties only accounted for 1.4% of the total value of properties. The average value of forest land per ancestor was 6.8 million yen, much less than the values of housing land, farmland,

Figure 3 shows the number of ancestors with property that included forested land and the

About 10,000 inheritances that included forested land were required to pay inheritance tax. The evaluated value of forest land per inheritance has decreased since 1992. For example, when the value in 1992 is fixed to 100, the value in 2014 is 17.4. The reason for this decrease is the decrease in the value of forest land, since the values of both forest land and housing land have decreased. Figure 4 shows the number of ancestors and value of housing land. The pattern of the graph is similar to that of forest land, and when the peak value in 1992 is fixed

Note: The total of number of ancestors is the actual number of ancestors. In cases of rice fields and farmland, cultivation

rights and perennial tenant rights are included. In the case of housing land, leaseholding is included.

a small percentage of cases included inherited land property that was only forest land.

The value of forest land per ancestor has decreased since 1992 (Figure 3). The value in the peak year (1992) was 39 million yen, which decreased to 6.8 million yen in 2014. The reason for this decrease is a decrease in the standard value at the standard final cutting age due to decreases in both forest land and stumpage prices (Figure 6).

The stumpage prices of C. japonica and C. obtusa peaked in 1980, and have been decreasing since. Setting the stumpage price in 1980 to 100, the stumpage price in 2016 was 12.3 for C. japonica and 14.4 for C. obtusa. Compared to the stumpage prices in 1960, 7,148 yen and 7,966 yen for C. japonica and C. obtusa, respectively, the stumpage prices in 2016 were 39.2 and 77.2% of those in 1960, respectively. Since this represents the nominal price, a long-term increase in prices should be considered. Using the Corporate Goods Price Index of 2005 by the Bank of Japan, the index was 50.8 and 105.0 in 1960 and 2011, respectively. Using the Consumer Price Index of 2010 by the

reduce the standing tree value before their death.<sup>17</sup> Since many plantation forests planted after World War II are now reaching the standard cutting age, and thinning has been promoted by the Forestry Agency, the value of standing trees is increasing. To reduce the burden of the inheritor further, forest owners may sell not only standing trees, but also the forest land. It has been noted that some forest owners, for example, older owners without an inheritor, have stopped managing their forest with the intent of selling their forest land along with standing trees to logging companies;18 however, it is difficult to determine the statistics behind this trend. It should be mentioned that the reason for such action is not limited to inheritance, as the decrease in stumpage price (Figure 6) and decrease in log price have led to decreases in income from timber sales. Table 5 shows statistical indexes of forest management. Net income (subtracting column (B) from column (A)) has recently decreased. The percentage of tax in

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Source: Ministry of Agriculture, Forestry and Fisheries, Statistics of Forest Management.19

17Sugano and Tani ([14], p. 32) introduced the following management example: a forest owner conducted clear-cutting of 40- to 50-year-old C. japonica and C. obtusa, and then planted low-value broad-leaved trees. In addition to the value of standing trees, the total value of the inherited properties decreased. As a result, the tax rate (see Table 1) decreased. Nagata [15] mentioned a similar problem at the time of the post-war tax reform, in that there was a large imbalance between cases in which the forest owners conducted clear-cutting and cases in which the forest owners maintained the

19Statistics Bureau, Ministry of Internal Affairs and Communications, e-Stat, http://www.e-stat.go.jp/SG1/estat/List.do?

Note: In this case, tax refers to taxes, public dues, various burden charges, etc.

18Such situations have been mentioned before 2000 (e.g., [16], p. 2).

bid=000001047783&cycode=0 [Accessed: April 18, 2017] (in Japanese)

Table 5. Index of forest management.

forest without clear-cutting.

Figure 5. Number of ancestors and value of standing trees. Source: National Tax Agency Annual Statistics Report.

Figure 6. Stumpage price. Source: Forestry Agency, Annual Statistics of Forestry, Annual Statistics of Forest and Forestry; original source is the Japan Real Estate Institute. Note: As of March 31.

Bank of Japan, the index was 19.1 and 99.7 in 1960 and 2011, respectively. In other words, between 1960 and 2011, the Corporate Goods Price Index increased twofold and the Consumer Price Index increased fivefold. Under such long-term increases in the price index, the nominal prices of 2016 were 39.2 and 77.2% of those in 1960, showing a decrease in price.

The large decrease in stumpage price has affected the value of forests during evaluations for inheritance tax. Since the area of inherited forest is not included in the National Tax Agency Annual Statistics Report, further statistical analysis is difficult, and analyses related to on-site surveys is a topic of future research.

Given the large decreases in stumpage price, it is possible that the stumpage price will decrease beyond the break-even point. When forest owners cannot expect any income from cutting after inheritance, the inheritance tax is only a burden to the inheritor. This would create a scenario where there is a probability that some forest owners would cut standing trees to reduce the standing tree value before their death.<sup>17</sup> Since many plantation forests planted after World War II are now reaching the standard cutting age, and thinning has been promoted by the Forestry Agency, the value of standing trees is increasing. To reduce the burden of the inheritor further, forest owners may sell not only standing trees, but also the forest land. It has been noted that some forest owners, for example, older owners without an inheritor, have stopped managing their forest with the intent of selling their forest land along with standing trees to logging companies;18 however, it is difficult to determine the statistics behind this trend. It should be mentioned that the reason for such action is not limited to inheritance, as the decrease in stumpage price (Figure 6) and decrease in log price have led to decreases in income from timber sales. Table 5 shows statistical indexes of forest management. Net income (subtracting column (B) from column (A)) has recently decreased. The percentage of tax in


Source: Ministry of Agriculture, Forestry and Fisheries, Statistics of Forest Management.19 Note: In this case, tax refers to taxes, public dues, various burden charges, etc.

Table 5. Index of forest management.

Bank of Japan, the index was 19.1 and 99.7 in 1960 and 2011, respectively. In other words, between 1960 and 2011, the Corporate Goods Price Index increased twofold and the Consumer Price Index increased fivefold. Under such long-term increases in the price index, the nominal

Figure 6. Stumpage price. Source: Forestry Agency, Annual Statistics of Forestry, Annual Statistics of Forest and Forestry;

Figure 5. Number of ancestors and value of standing trees. Source: National Tax Agency Annual Statistics Report.

The large decrease in stumpage price has affected the value of forests during evaluations for inheritance tax. Since the area of inherited forest is not included in the National Tax Agency Annual Statistics Report, further statistical analysis is difficult, and analyses related to on-site

Given the large decreases in stumpage price, it is possible that the stumpage price will decrease beyond the break-even point. When forest owners cannot expect any income from cutting after inheritance, the inheritance tax is only a burden to the inheritor. This would create a scenario where there is a probability that some forest owners would cut standing trees to

prices of 2016 were 39.2 and 77.2% of those in 1960, showing a decrease in price.

original source is the Japan Real Estate Institute. Note: As of March 31.

surveys is a topic of future research.

168 Taxes and Taxation Trends

<sup>17</sup>Sugano and Tani ([14], p. 32) introduced the following management example: a forest owner conducted clear-cutting of 40- to 50-year-old C. japonica and C. obtusa, and then planted low-value broad-leaved trees. In addition to the value of standing trees, the total value of the inherited properties decreased. As a result, the tax rate (see Table 1) decreased. Nagata [15] mentioned a similar problem at the time of the post-war tax reform, in that there was a large imbalance between cases in which the forest owners conducted clear-cutting and cases in which the forest owners maintained the forest without clear-cutting.

<sup>18</sup>Such situations have been mentioned before 2000 (e.g., [16], p. 2).

<sup>19</sup>Statistics Bureau, Ministry of Internal Affairs and Communications, e-Stat, http://www.e-stat.go.jp/SG1/estat/List.do? bid=000001047783&cycode=0 [Accessed: April 18, 2017] (in Japanese)

which forest inheritance tax is not included in the statistics based on the total cost is almost 6–8%; however, the amount of tax currently yields a net income. This management situation is the foundation of the current abandonment of forest management.
