Internet Auction to Put a Stop to Increasing Tax Payment Arrears[1]Kitakata City, Fukushima Prefecture

Normal Public Auction Methods were not Viable

The three-storied, cream-colored City Hall constructed in reinforced concrete resembles an elementary or junior high school at a glance. The employees' working spaces are paneled off into sections, and visitors are required to remove their shoes and wear slippers when entering the building. The counter over which the local residents are served was designed forty years ago and seemed to be a new and exciting idea at the time.

The size of the city practically quadrupled with the amalgamation, and special amalgamated districts were created to ensure that the existing services and systems of these towns and villages could continue unhindered. The reason for this is that it was impossible to abolish all of the festivals and financial assistance systems that were firmly established in each town and village since olden times, or the periodical financial aid systems that were used for providing bus services to replace the discontinued railway line so that children could get to and from school.

However, there was one issue that we had to approach, and that was the integration of each town and village's information systems. Consultants were invited to take part in the Information Committee that was set up by the merger consultation committee, and after countless investigations, it was decided that the Data Center located in the former Kitakata City would be outsourced. Each of the four amalgamated towns and villages had installed their own packaged systems that were processed through a common system that covered the Aizu region, but all of these systems were replaced together with the amalgamation in January 2006.

It was necessary to replace the tax processing system. According to Mr. Keiichi Kusuyama, the Assistant Manager of the Tax Section who agreed to be interviewed for this report, the migration work was able to proceed smoothly owing to one of the staff members working under him having been transferred from the IT Department.

Looking back on this time, Mr. Kusuyama remembers, "The people assigned the jobs of data migration, etc., were under a lot of pressure at the time. The Tax Section had to take over all of the fixed-asset tax and tax payment arrears responsibilities for one city, two towns and two villages within a single day on January 4th, which was the day of the amalgamation. This naturally meant that nobody in the section was able to take any time off over the year end and new year period."

So, what was the motivation behind adopting an Internet auction system, which is the main subject of this report?

Mr. Kusuyama's reply to this question couldn't have been simpler: "Mr. Yoshi Kinouchi, the sculptor."

For those of you who have never heard of this person, the following is quoted from Who's Who.

Yoshi Kinouchi: b. 1892, d. 1977. Sculptor. Born in Mito, Ibaraki Prefecture, Kinouchi studied under Fumio Asakura from 1914, was first selected to submit work for Bunten, the annual Japan Art Academy Award in 1916, and received a special award at the Nika Art Exhibition in 1935. Awarded the medal with Dark Blue Ribbon in 1970 and the third class of the Order of the Sacred Treasure in 1972. Sculptured a large number of bronze figures and statues using a terracotta technique learned in Europe before World War II.

The Assistant Manager Mr. Kusuyama continues, "We had a certain company in the city back in 2002 that was unable to meet its tax obligations. The sum in arrears amounted to approximately twenty million yen. Having no other choice, this company had to sell off the golf membership rights it owned, together with some bronze statues and reliefs sculptured by Yoshi Kinouchi."

An expert was asked to evaluate these items, and he estimated that a total of sixteen Kinouchi works, involving eleven of the bronze statues and five of the reliefs, was sufficient to cover the sum that was in arrears. It was our responsibility to collect these items and sell them in lieu of unpaid taxes, but there is a tendency for bronze statues to be less popular than other art work. Furthermore, the estimation by the expert had valued the cheapest item at \540,000 and the most expensive, a statue entitled The Mermaid, at \3,150,000, which seemed to be well out of the reach of individual bidders.

The Assistant Manager Mr. Kusuyama recounts, "The items we had collected were sold off to the public twice during 2004; once in the spring and once in the fall. The first of these was via normal sales routes, and the second was via the city's home page. Although we managed to sell the golf membership rights, we were unable to sell a single one of Kinouchi's sculptures.

They weren't considered suitable to be used as monuments in city facilities, and there was also the financial issue at stake. Although it was regrettable from the stance of Yoshi Kinouchi and all other people involved, it appeared as if we had no choice but to put some of these Japanese cultural assets into Kitakata City's dead storage vaults.

It was when Mr. Kusuyama was facing this aggravating problem when he noticed a newspaper article reporting on Tokyo Metropolitan Government's success in selling items via the Internet. The article was dated July 2004. According to an announcement released by the Tokyo Metropolitan Government, applications for participation were accepted between July 15th and July 30th of the same year, and bidding would be possible for a period of forty-eight hours between 10:00 on the morning of August 10th until 10:00 on the morning of the 12th. The hammer fell on a seventeen-year old Rolls Royce at approximately ten times the estimated value, and the entire list sold for approximately four times more than was expected. In other words, it was a huge success.

The Assistant Manager Mr. Kusuyama says, "However, I was sort of convinced that this was only possible because it was Tokyo. The auction list was extremely diversified and included high-class foreign cars as well as porcelain and paintings by famous artists, and I was sure that this is what had attracted all the attention. I was dubious as to whether a small local authority like ours would be able to attract any participants."

Not expecting much and convinced the idea would result in nothing, the City contacted the Tax Collection Department in the Tokyo Metropolitan Government and listened to what they had to say. They suggested that we give it a try, and even introduced us to the person in charge of jointly developing the Internet auction system at Yahoo! We had to try, otherwise we would never be able to collect on non-paid taxes.

Although the auction system is operated by Yahoo!, the auctions themselves are controlled by the regional public organizations that are in charge of administering taxes. Yahoo! is the provider of the system, and simply leases out a vehicle on which an auction can be carried out. And the public sale system was already up and running. All that was needed now was the go-ahead from Kitakata City.