JAPAN - The National Tax Agency has discovered that Tokai University hid a total of about ¥1.2 billion (S$14.7 million) in income over six years through March 2011, according to sources.
The agency believes the university formed a dummy contract with an affiliated firm that operates the Tokai University Club and gave it about ¥100 million a year to maintain the operations of the club, which was established at the initiative of the university's founder.
Falsification of accounts put the club operator in the black, but the university's other profit-making businesses were burdened with accumulated debts of ¥1.46 billion at one point.
The total amount of income the university failed to declare, including that handled under other accounting procedures, was about ¥2.2 billion. The corporate tax penalty, including a heavy additional tax, was about ¥80 million after past deficits were offset.
In the case of public-interest organisations such as schools and religious organisations, the earnings from nonprofit businesses are exempt from tax, while those from for-profit businesses are taxable but receive preferential treatment.
The Corporation Tax Law allows public interest corporations, including educational corporations, to carry out 34 types of profit-making businesses under certain conditions.
"We followed the instructions of the National Tax Agency, and corrected the situation," a university official said. The official said the university has already revised the tax report and paid the penalty.
According to sources close to the university and others, the club facility has been located in Kasumigaseki Building in Chiyoda Ward, Tokyo, since the building was completed in 1968, because senior members of the company managing the building and university founder Shigeyoshi Matsumae had a close relationship.