Undeclared Income of Wealthy Hits Record High in Japan
10:30 JST, February 21, 2023
TOKYO (Jiji Press) — Undeclared income of wealthy people in Japan totaled ¥83.9 billion in the year through June 2022, up a steep 72.3% from the preceding year and the highest annual level since data became available in the year to June 2010.
The record figure was revealed as a result of income tax investigations for the 2021 business year conducted by regional taxation bureaus across the nation.
The National Tax Agency is actively checking whether affluent people have filed income tax returns properly, focusing on large holders of securities and real estate as well as high-income earners and individuals who have made large overseas investments.
According to the agency, the amount of back taxes collected from wealthy people more than doubled from the previous fiscal year to ¥23.8 billion. The undeclared incomes averaged ¥37.67 million per individual, and the average amount of back taxes came to ¥10.67 million, both record highs.
For people involved in overseas investments, the figures were even higher. The average undeclared income was ¥78.36 million, with the average back tax standing at ¥29.53 million.
“We exchange account and other information with foreign authorities every year and have set up an investigation team,” an official at the agency’s Individual Taxation Division said.
The agency did not disclose its definition of wealthy people, however, arguing that the information could put such people on alert and prompt them to take action that make investigations more difficult.
One possible indication of how much assets and income put an individual in the deep pocket category is provided by a document called the asset and liability record, which certain individuals are required to submit to the agency.
Those who meet certain criteria, such as annual income of more than ¥20 million plus assets of ¥300 million or more, excluding retirement allowances, have to file the record with the agency. The document is believed to be among the information used for the authorities’ income tax investigations.
Nomura Research Institute Ltd. regards households with net financial assets between ¥100 million and less than ¥500 million as “wealthy” families. It estimates that as of 2019, there were 1.24 million such households in Japan. The number of “superrich” households, with ¥500 million or more, was seen totaling 87,000.
The number of such well-heeled families has increased steadily since the launch of Abenomics, the signature deflation-fighting policy mix of the late Prime Minister Shinzo Abe, which sent stock prices rallying on the back of massive monetary easing and the yen’s depreciation. Among additional factors, some experts point to a cut in the maximum income tax rate and a uniform 20% tax rate for financial income, which is lower than tax rates for other earnings of those classified as high income.
Every year, the National Tax Agency publishes a list of high-income industry sectors related to wealthy people, ranking them in terms of average undeclared income per case.
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