Note 3-52

52 If the withheld revenue rate is raised, the standard financial demand will be cut by a sum corresponding to the rate increase. This portion is thus put out of a financial resources shortage compensation based on the standard financial demand and is left as resources that local governments can spend independently. The withheld revenue rate was set at 30% when the local financial equity allotment, the predecessor of the local allocation tax, was inaugurated in 1950. On an expansion in the range of spending categories incorporated into the standard financial demand, however, the rate was cut to 20% for prefectures in FY 1953 and to 25% for municipalities in FY 1964. The lower rates are still being maintained.