Business with Undeclared Individual Incomes in Japan (2019-2021)
- November 20, 2023
- Posted by: Aki Kojima
- Category: Tax Investigation
Let’s see the jobs the National Tax Agency(NTA) required back taxes from 2019 to 2021 and consider the risk of additional taxation in Japan.
In doing accounting treatments, we always think in the back of our heads about tax investigations. It requires you to pay additional taxes and lose your trust in the business relationship between other companies.
The readers of this article are honest and serious about tax filing, but it would be beneficial to understand the amounts and jobs for which NTA did tax research.
Contents
Top 5 Professions for Undeclared Income in Japan: 2019 Edition
The year 2019 saw diverse industries, from Adult Entertainment to Solar Power Generation, facing issues with undeclared income, as NTA in Japan pointed out.
It is well-known that the adult entertainment industry tends to hide incomes. NTA has often tried to check whether they file tax returns correctly.
An exciting trend is that NTA has learned about tax evasion in the solar power business. The business often accounts for much depreciation, so the temporary calculation attracts money skimming.
You can see the whole ranking below.
| Jobs or business | hidden income/one tax filing | Back Tax | comments |
|---|---|---|---|
| Adult Entertainment Industry | JPY33.73 million | JPY10.53 million | It is notoriously challenging to monitor due to the nature of the business, leading the list with the highest undeclared income. |
| Business Consultants | JPY33.21 million | JPY13.54 million | A profession with complex income streams and high consulting fees that may not always be fully reported. |
| Host and Hostess Clubs | JPY28.73 million | JPY8.22 million | The nightlife sector is prone to underreporting due to largely cash-based operations. |
| Solar Power Business | JPY17.18 million | JPY2.94 million | The growing renewable energy sector faces challenges in accurate income reporting amidst rapid expansion. |
| System Engineers | JPY12.80 million | JPY1.90 million | High earning potential combined with freelance and contract work can lead to inconsistencies in income declaration. |
2020’s High-Risk Jobs: Japan’s Top 5 for Undeclared Income
As pointed out by NTA in 2020, there are many newcomers in business. The first position is a programmer. As per the report, it was in the Kyushu area, and the programmer automatically sold software to trade cryptocurrencies.
COVID-19 influences the trends of the pandemic because NTA couldn’t investigate as much as usual. They seemed to try to focus on specific businesses and jobs. It didn’t appear in the table below, but NTA took more investigation on business related to sharing economies, wealthy class, and investigation abroad.
| Jobs or business | hidden income/one tax filing | Back Tax | comments |
|---|---|---|---|
| Programmers | JPY49.27 million | JPY7.16 million | The impact of COVID-19 on Digital Transformation demand can be seen. |
| Livestock agriculture sector (specifically beef cattle) | JPY35.15 million | JPY5.03 million | It was more expensive than in previous years. May be because of the demand for food while staying at home? |
| Internal Medicine Physician | JPY33.39 million | JPY8.05 million | The amount of back tax is high compared to the average of the past years. |
| Host and Hostess Clubs | JPY28.34 million | JPY8.64 million | It is ranked as usual. |
| Solar Power Business | JPY26.03 million | JPY8.25 million | As the trends from the last year. |
Japan’s 2021 Breakdown: The Leading 5 Jobs in Undeclared Earnings
The landscape of undeclared income in Japan saw a significant shift in 2021, mainly attributable to the repercussions of the COVID-19 pandemic. Previously ranked seventh, business consultants surged to the top with JPY 22.66 million in undeclared income per case.
This ascent was not merely a reflection of increased non-compliance but also a consequence of the pandemic’s economic blow to industries such as adult entertainment and food service, which traditionally reported higher amounts of undeclared income.
| Jobs or business | hidden income/one tax filing | Back Tax | comments |
|---|---|---|---|
| Business Consultants | JPY22.66 million | JPY6.11 million | The rise in undeclared income for business consultants can be partly attributed to high contingency fees associated with M&A consulting, where advisers often receive substantial success-based compensation. |
| System Engineers | JPY21.50 million | JPY5.19 million | The delineation between programmers and consultants is often ambiguous, and the rise of cryptocurrency may influence it. |
| Breeder | JPY21.36 million | JPY5.18 million | The pandemic has seen an increase in pet ownership, which may have influenced the rise in undeclared income among breeders. |
| Real Estate Brokerage | JPY17.52 million | JPY4.10 million | Industrial designers’ undeclared income may include earnings from digital transformation projects and website design, though this remains speculative. |
| Real Estate brokerage | JPY16.56 million | JPY4.53 million | COVID-19 loans may have spurred investment activity in the real estate sector. |