Here's one message from the tax office you no doubt hope you'll never receive: "Concerning the income you declared, we are giving you prior notification of an audit. While we're truly sorry to interfere with your busy schedule, you are requested to make contact with the responsible auditor."
Following up on the written request by telephone, relates Shukan Shincho (Nov 22), the involved party is informed by the gentleman at the tax office, "You transmitted money abroad and bought financial instruments, didn't you?"
It appears that the tax office is able to get wind of money you've squirreled away in a tax haven -- something you even concealed from your own family. In the end, you wind up filing a revised tax return, and are hit with punitive fines.
This kind of scenario, the magazine warns, is likely to be increasingly common from 2019. How do we know this? Because on Oct 31, the National Tax Agency made public that it has obtained data on 550,000 overseas accounts held by Japanese (more specifically, Japan residents), in no fewer than 64 countries, regions and territories.
"The tax agency was able to obtain the information on accounts through the CRS (Common Reporting Standard) set up by OECD," a reporter who covers the tax agency is quoted as saying. "The CRS provides for tax departments in the respective countries, to which Japan also belongs, to automatically exchange data. All the data is digitalized and by agreeing to participate in CRS, it becomes obligatory to provide the data."
The account data includes name, address and the name of the institution, account balance and so on. Tax havens such as Hong Kong and Singapore have also joined, and the system makes it virtually impossible to hide transmission of funds from Japan for deposit in hidden foreign accounts.
This isn't the first time the Japanese tax office has attempted to go after those who would attempt to evade taxes by sending the money abroad. Six years ago, it became compulsory to report overseas assets exceeding 50 million yen. Thanks to tax treaties concluded with other countries, information was obtained on about 100,000 cases.
But in 2016, reports submitted to the tax agency numbered only 9,102.
"The agency was convinced there were a lot more people out there who weren't reporting," said the aforementioned reporter.
On the surface, then, the possibility of getting its claws on 550,000 overseas accounts may sound like a lot, but based on the general opinions of several private investment bankers, that figure "comes across as quite low."
Hidetoshi Kiyotake, author of the book "Private Banker," which realistically tells the story of private bankers in Singapore and efforts by Japanese tax officials, suggests the figure of 550,000 may be only "one tenth of the actual number."
"There's no mistake that because of the data exchanges based on CRS, the net is closing on capital flight overseas," Kiyotake tells Shukan Shincho. "There are still some loopholes, however. For instance, if a wealthy Japanese establishes a residence in Singapore and opens an account, the tax agency won't have access to his data. The law only pertains to residents of Japan who hold foreign accounts. And one more thing: there's still no way to tax gains obtained from dealing in crypto currencies."
In any event, analysis of account data by the tax agency is just now gearing up, the article concludes, so it may be a while yet before they start lowering the boom of tax evaders.© JapanToday