Keeping track of overseas assets helps prevent tax evasion by rich

The Yomiuri ShimbunFor the people not to feel a sense of unfairness, it is imperative to be vigilant toward attempts by wealthy people to evade tax.

The Osaka Regional Taxation Bureau has brought a charge against the president of a furniture import and export company in Kyoto for not submitting a report of foreign assets, the first accusation made over not producing such a document.

The system of reporting foreign assets is aimed at grasping the amount of overseas assets held by the wealthy. If the amount of deposits, real estate and other assets a person holds overseas exceeds ¥50 million, it is mandatory for them to report it to a tax office.

If the “not reported” situation becomes widespread, it may lead to rampant tax evasion. It is quite natural for strict measures to be taken.

The system was introduced in 2014 amid awareness of a pressing need for measures to be taken to deal with tax evasion conducted globally.

It is difficult to grasp the flow of money across national borders. It is difficult to obtain bank account information especially when financial institutions of such high-secrecy tax havens as Panama and the British Virgin Islands are used.

Even before the introduction of the system, Japanese financial institutions were obliged to report to tax offices transactions with foreign banking institutions if the amount of a transaction exceeds ¥1 million. But it was difficult to ascertain the real picture of transactions because the purposes of money transfers could not be confirmed.

Since the introduction of the foreign asset reporting system, the amount of overseas assets reported has increased, with about 9,500 cases totaling ¥3.6 trillion in value in 2017. Tax authorities should make continued efforts to acquire information on overseas assets with a view to imposing tax adequately.

Strengthen intl framework

International cooperation is also indispensable.

The Organization for Economic Cooperation and Development has arranged a system to exchange bank account information among nations. The tax authorities of these countries report information once a year, such as on the account balance of those not residing in their countries, based on the Common Reporting Standard rules.

About 100 countries and regions take part in the CRS framework. Japan joined it last year and obtained about 550,000 pieces of information from 64 countries and regions. These pieces of information include those via which failure to declare inheritance tax was detected. It can be said that the participation in the CRS has had an effect.

However, there are moves to dodge the international cooperation network by doing such things as transferring deposits to non-CRS member nations. CRS participants include tax havens. It is also necessary to check the accuracy of reported information.

Japan should deepen communications with CRS member nations and thus enhance the workability of the monitoring system.

The nation’s tax authorities have been stepping up efforts to gather information about the rich. The income tax undeclared amounted to about ¥67 billion in fiscal 2017, an increase of 52 percent over the previous fiscal year. To preserve the people’s acceptance of the tax payment system, it is imperative to ensure that tax returns are declared thoroughly and properly.

(From The Yomiuri Shimbun, Aug. 10, 2019)Speech


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