5. Conclusions

The current forest inheritance tax system assumes that private forests are managed using a traditional family base. Furthermore, as a long-term production period is considered, some tax reduction measures have been applied to evaluate forest land and standing trees. Japanese forestry is facing management difficulties, particularly with the long-term decrease in

<sup>40</sup>Department of Statistics of the Ministry of Agriculture, Forestry and Fisheries.

stumpage prices that has occurred and the amendment of methods to evaluate forest land and standing trees. As a result, the value of forests has decreased.<sup>41</sup> However, the number of nonresident non-farmer inheritors is increasing, making it necessary to reconsider the forest inheritance system, including the inheritance tax,42 because the background and assumptions for preferential treatment have changed.

A new classification for private forest owners is needed. Under the current forest inheritance tax system framework, forest owners who manage their forests continuously with a plan, do not live on the land, and have no knowledge or concern about their forest management practices are treated equally, as if they were a family working the forest. In the latter case, this is just a holding of an estate, and the number of such forest owners will likely increase in the future. Tax reduction measures for such forest owners should be reconsidered.<sup>43</sup> If the reduction policy were canceled for such forest owners, they could begin forest management or sell the forest to appropriate persons who could manage it. A major problem is determining how to group forest owners. For example, forest owners could be divided into resident or nonresident owners,<sup>44</sup> but other important factors include the existence or lack of forest management, a forest plan, investments to the forest, etc. Many technical problems are readily imagined for each of these methods, which should be examined in detail in future research.

areas of farmland, forest land, and housing land, the total value of the inheritance property may be less than the minimum taxable rate, and the inheritor may continue to hold the forest without paying the inheritance tax when inheriting the forest property. This ensures that the

Figure 14. Age of the major financial supporter of households holding forests. Source: MIC, Statistics Bureau ([33], Table 87). Note: The major financial supporter is not the same as the householder. Generally, financial supporters are

The total population of Japan reached to a peak in the 2010 Population Census, but showed a decrease in the 2015 Population Census. The National Institute of Population and Social Security Research ([34], Table A-8) has estimated that the total population in 100 years will decrease to almost one-third based on an analysis of the 2010 Population Census. In such a situation, if the system and conditions surrounding forest management

Immediately after the end of World War II, most forest owners were also farmers. Since the family system was abolished after the war, children other than the successor could inherit forest, and many children moved to cities when beginning school or for a job. Therefore, the percentage of non-farmer forest owners has been increasing. In the 1990 Census of Agriculture and Forestry, 36.4% of forest owners with ≥0.1 ha were non-farmers, while 42.0% with ≥1 ha forest were nonfarmers in the 2015 Census of Agriculture and Forestry.40 The situation surrounding non-farmer non-resident forest owners is unclear, and should be examined further in future research. Regarding forest owners who live in urban areas, since the value of housing land is generally high, the total value of inheritance properties may surpass the minimum value for imposing the inheritance tax, and this set of circumstances should also be examined further in future research.

The current forest inheritance tax system assumes that private forests are managed using a traditional family base. Furthermore, as a long-term production period is considered, some tax reduction measures have been applied to evaluate forest land and standing trees. Japanese forestry is facing management difficulties, particularly with the long-term decrease in

Department of Statistics of the Ministry of Agriculture, Forestry and Fisheries.

do not change, the percentage of non-resident forest owners will increase.

small-sized holdings will continue in the future.

younger than householders.

184 Taxes and Taxation Trends

5. Conclusions

40

A postponement measure for forest owners with ≥100 ha of forest was introduced in 2012, but few people have applied to this new system, because there are several inhibitory conditions related to the postponement of the inheritance tax. The situation surrounding management of forest owners with ≥100 ha of forest is varied. For example, 43.9 and 33.9% of forest owners hold 100–500 ha and ≥500 ha of forest land, respectively, without managing it; therefore, it is difficult to use the holding size as the sole criterion for the inheritance tax postponement (Figure 12).45

Under the current inheritance tax postponement system and the forest management planning system, the criterion of large-scale forest management is defined as ≥100 ha. However, there appears to be no theoretical or statistical basis for the use of 100 ha as the cut-off. Holding size should be considered as a criterion, but the 100-ha holding size criterion is not necessarily justified. Although the introduction of an appropriate minimum area may be necessary,

<sup>41</sup>Tezuka [16] pointed out the low inheritance tax in Germany. The value of 80–100-year-old spruce was almost equal to one fifteenth of 90-year-old C. obtusa. Since the value of the standing trees at the standard cutting age has decreased, as shown in Figure 2, the difference appears to be decreasing.

<sup>42</sup>As shown in Table 5, the total amount of various taxes or public dues is now sometimes greater than the net income from timber sales; thus, problems may exist in the taxation system beyond the forest inheritance tax; however, this was beyond the scope of this paper. Supporting this, Kim [35] noted increases in the burden of several taxes other than the inheritance tax in Japan.

<sup>43</sup>When non-resident forest owners want to continue just holding, the amount of inheritance tax and annual municipal fixed proper tax must be low. To maintain the low-value of standing trees, forest roads should not be developed because, after road construction, the value of the standing trees along the forest increases, resulting in higher taxes.

<sup>44</sup>Taxation of non-resident forest owners was discussed before World War II in Hokkaido, which had a high percentage of non-resident forest owners ([36], pp. 47–51, pp. 83–85).

<sup>45</sup>The current postponement of the forest inheritance tax is closely connected with the forest management plan. The period of the current plan is 5 years, and the plan focuses on forest practices and forest road construction, which are related to the subsidy system. The current management planning system appears to have problems from the perspective of the inheritance system, and should be examined further in future research.

additional measures for lower holding sizes are also needed. Furthermore, institutional redesign by including other criteria, such as area of residence and family labor force, etc. may be necessary, which is a topic for future research. Problems associated with the inheritance of private forest are not limited to Japan, but it was beyond the scope of this study to analyze the forest inheritance tax from an international perspective.46 An increase in non-resident nonfarmer forest owners and aging of forest owners can be found in various developed countries, and a comparison of international policy on the forest inheritance system, including the inheritance tax, taking this change into account is a topic for future research.

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