The economical merits of the standard tax rate concerning the local tax in Japan have not necessarily been clear. The theoretical model in Yabuki (2004) which is a representative previous work over this problem concludes that the standard rate as a de facto minimum of the rate of local tax improves the efficiency of regional economy through encouraging administrative effort of the local government. Additionally, in Japan, there were not a few local governments which set the local tax at the rate lower than the standard tax rate in the mid-1950s. Paying attention to both, I checked with stochastic frontier analysis whether tax rates above the standard tax rate raised by each local government had brought improvement in technical efficiency of the regional economy concerned.
As a result of estimation, it became clear that there was an effect of the standard tax rate which encouraged administrative efforts of local governments toward improving technical efficiency of regional economies as pointed out in Yabuki (2004).
In recent years, expansion of tax autonomy of local governments is one of policy issues in Japan. In considering whether the present standard tax rate should be abolished from a viewpoint of tax autonomy expansion, we should also watch the economical merits of the standard tax rate in addition to the political and economical demerits.