TOKYO (TR) – The Tokyo Regional Taxation Bureau has flagged a copyright management company headed by Kazuyuki Sekiguchi, bassist of the iconic Japanese rock band Southern All Stars, for failing to declare approximately 580 million yen in income, reports NHK (Oct. 4).
The Meguro Ward-based company Nohohon was ordered to pay roughly 53 million yen in back taxes and penalties for the three-year period ending in September 2023.
The massive underreporting stems from a dubious tax-saving loophole introduced by a Tokyo-based accounting firm. Around 2020, after Sekiguchi reaped significant profits from providing music to the hit video game series Momotaro Dentetsu, he consulted Kurowdo Kaikei, a tax accounting firm in Nihonbashi, to reduce his tax burden.
Under the firm’s guidance in February 2021, Nohohon purchased company shares prepared by the tax accountant for 588 million yen. Just seven months later, the company sold those same shares to Sekiguchi personally for a mere 1.5 million yen. Nohohon then booked the 586.5-million-yen difference as a massive loss, rolling it over into subsequent years to effectively reduce its corporate profits to zero.
Chose not to fight
Tax authorities flatly rejected the maneuver, ruling that the transaction “lacked economic rationality,” was highly unnatural, and served only to improperly slash the company’s corporate tax burden.
Following the bureau’s assessment, the tax accountant urged Sekiguchi to file an appeal. Instead, Sekiguchi chose not to fight the ruling and promptly terminated his contract with the firm.
“We were told by the tax accountant that this was a legal transaction to reduce our tax burden, but we did not grasp the specific methods used,” a representative for Nohohon said. “We do not dispute the authorities’ findings and have already paid all the requested taxes and penalties in full.”
“Other economic objectives”
Meanwhile, a representative for Kurowdo Kaikei pushed back against the allegations, stating the firm believed the legal appropriateness of the tax authorities’ claims should have been challenged. The firm denied selling the scheme as a tax-saving product, claiming the transaction was based on “other economic objectives.”
Despite the firm’s denial of pitching the method to multiple clients, investigative sources allege that Kurowdo Kaikei introduced the exact same loophole to at least 30 other companies nationwide.
The National Tax Agency is reportedly conducting sweeping audits into the firm’s clients. Authorities are voicing growing alarm over tax accountants targeting wealthy individuals and corporate executives with “legal” tax-dodging schemes, and plan to boost specialized personnel to aggressively crack down on the practice.
