Japan cracks down on overseas tax evaders

Reforms by Tokyo will allow tax authorities in other countries to seize assets on behalf of the Japanese government

Under a new law, anyone caught concealing assets abroad will face a prison term of up to three years and a fine of 2.5 million yen

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Revisions to Japan’s tax law are on the cards. Photo: Shutterstock

Published: 11:30am, 10 Dec 2020Updated: 11:48am, 10 Dec 2020

Japan is set to begin an aggressive campaign against tax evasion through overseas bolt-holes, with a series of changes to the national taxation system to include stiffer penalties for anyone attempting to conceal assets abroad as well as punishment for anyone abetting evasion efforts.

An outline of the reforms was due to be compiled by Thursday, with the revisions to the National Tax Collection Law to be submitted for debate in the Diet in the early part of next year.

At present, Japan’s tax authorities are only legally able to seize assets in Japan of a person who has failed to pay their taxes or who is known to have concealed or undeclared funds overseas. In an effort to claw back more of what it is owed, Tokyo has been reaching out to foreign governments and signing reciprocal treaties with a cooperative collection system.

This will permit tax authorities in another country to seize assets on behalf of the Japanese government, with Tokyo carrying out the same duties on foreigners’ undeclared or concealed assets in Japan.

As of October, Japan had signed treaties with 69 countries, including South Korea and India, but has not yet reached agreement with counterpart authorities in Hong Kong, China and most nations in Southeast Asia.

The system has already proved its worth to Japanese tax authorities, who requested help in collecting tax from abroad on 29 occasions in the year to July, bringing in 3.7 billion yen (US$35.5 million). Tokyo also received seven applications for help from foreign tax organisations, with the total involved coming to around 200 million yen.

The additions to the existing law are designed to encourage more people to come clean on their taxable assets and permit the authorities to impose harsher punishments as an inducement, while the government is also looking to sign more reciprocal treaties with foreign tax authorities.

An executive with one of the “Big Four” global accounting firms said the new legislation was overdue.