Note 1-27

27 With regard to conversion to unrestricted fund subsidies amounting to 244 billion yen, of which 166.1 billion yen are for child-care expenses (including subsidies for management of public day care centers), the government earmarked 219.8 billion yen, required for measures for streamlining operations and projects, as a subject of transfer of tax resources. Also, regarding the 424.9 billion yen, or the sum of the amount earmarked for transfer mentioned above and the burden on the national government (205.1 billion yen) after the conversion to unrestricted fund of state subsidies for compulsory education (mutual aid long-term benefits, etc.) in FY2003, a local income transfer tax was established and it was decided that tax sources would be transferred to local governments. Also, with regard to converting state subsidies for compulsory education (retirement allowances and child allowances) (230.9 billion yen) to unrestricted fund, it was decided that tentative subsidies will be established until future transfer of tax resources is implemented. The local income transfer tax is a tentative measure until a full-fledged transfer of tax resources is carried out from income tax to individual inhabitant tax by FY2006. Under this system, 424.9 billion yen will be transferred from income tax revenue to prefectures and municipalities in FY 2006, proportional to their population.