Nifco chairman failed to report $12 million of income

Nifco chairman failed to report $12 million of income

The chairman of the board of Nifco Inc., a major resin parts manufacturer that owns the English-language newspaper The Japan Times and the Simmons bed company as subsidiaries, failed to report about ¥1 billion (S$12 million) of income, resulting in unjustifiable tax avoidance, the tax authorities concluded, according to sources.

Toshiaki Ogasawara, 83, chairman of the Yokohama-based company listed on the First Section of the Tokyo Stock Exchange, was told by the Tokyo Regional Taxation Bureau that he had failed to report taxable income for three years until 2011.

Ogasawara emigrated to Hong Kong and did not report part of his income to Japanese tax authorities.

But the taxation bureau ruled that his actual place of residence is Japan and his failure to report the income constituted unjustifiable avoidance of tax.

The taxation bureau imposed additional taxes on Ogasawara's income after deducting tax payments made overseas. Including a penalty for the failure to report the income, the additional taxes amounted to more than ¥100 million. The sources said that Ogasawara has paid the additional taxes.

According to the sources and an explanation by Nifco, Ogasawara left the post of chairman of the board in June 2008 and became the company's honorary chairman. Then he moved his residence from Minato Ward, Tokyo, to a condominium in Hong Kong. He also moved his resident registration.

After that, he paid withholding income tax to the Japanese authorities on income from salaries from Nifco and dividends of stocks.

But he did not report his income from salaries from overseas subsidiaries in Hong Kong, South Korea and other countries or from investment returns on assets in other countries to the Japanese authorities.

In June 2010, two years after he stepped down as chairman, he again became the chairman of the board of Nifco.

But he did not move his resident registration from Hong Kong, and did not resume payments of taxes in Japan on his income from overseas.

However, Ogasawara frequently came to Japan after emigrating to Hong Kong and used a house in Tokyo's Shibaura district, which was his former residence. The number of days he spent in Japan significantly exceeded the time he spent in Hong Kong.

In addition, the sources said that Ogasawara had controlled Nifco's management by, for example, presenting business policies in meetings of the company's board while he was the honorary chairman.

Therefore, the taxation bureau judged that his place of residence was Japan and he should have paid taxes in Japan.

Income from overseas, stock dividends and other assets of the kind are not taxed in Hong Kong, and Hong Kong's income tax rate is about 15 per cent, much lower than Japan's, which is up to 40 per cent.

Because the Hong Kong tax rates are less than half those in Japan, the taxation bureau judged that Ogasawara reduced his taxable income by not reporting his income inside Japan.

A tax accountant working for Ogasawara explained, "Emigration to Hong Kong was for his business activities after considering the company's global operations, and it was not for avoiding taxes. But it is true that the periods of his stay in Hong Kong were short, and thus he accepted the conclusion of the taxation bureau."

Ogasawara was quoted as saying, "I believed that tax payments in Japan were completed only by paying the withholding tax."

Nifco was established by Ogasawara in 1967 and has expanded its businesses mainly through manufacturing resin parts for automobiles.

Nifco purchased The Japan Times and Simmons in 1996. Including the two, Nifco owns about 50 subsidiaries in Japan and abroad, and is active in a wide range of business sectors.

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