Even now, a tax audit is taking place somewhere in Japan.
By the way, would you be able to stay calm if an official from the tax office called you or even showed up at your door?
Despite how you may sound on the phone, you would probably feel nervous.
When people are nervous, unexpected words can slip out.
At times like that, there is a magic phrase.
“I leave everything to our tax accountant, so please contact them”
Whether it is a phone call or a visit, and no matter how flustered you become, this phrase is all you need. Whenever the tax office contacts you, always use this magic phrase.
That is really all there is to it, but I will explain why you need to be ready to say these words without hesitation.
By law, your tax accountant must also be notified
In ordinary cases, a tax audit is conducted after advance notice has been given.
The Certified Public Tax Accountant Act also stipulates that advance notice must be given to the taxpayer’s tax accountant.
(Notice of Audit)Article 34 When a tax authority official examines the books and documents (including electromagnetic records created or retained in place of those books and documents; the same applies below) of a person who has filed a return stating the tax base or other particulars, in relation to the tax covered by the return and after giving that person advance notice of the date, time and place, and a certified public tax accountant has submitted a document under Article 30 (Japanese) in relation to that tax, the official must also notify that certified public tax accountant of the date, time, and place of the audit.
In reality, however, this rule is sometimes disregarded even though it is set out in law.
- Contacting the company first and settling the matter there
- Suddenly appearing at the company and getting into a mild back-and-forth: “It’s fine, I only need to take a quick look”
- Even after the company asks the official to contact its tax accountant, deliberately avoiding the adviser during the audit period and instead contacting the company directly or visiting without an appointment
Executives who run customer-facing businesses sometimes approach tax office officials with the same mindset they use toward customers. One wrong step in a tax matter can leave you carrying a major risk before you realize it, so you should take a firm stance rather than treat the official as a “customer.”
In most cases, an auditor contacts someone at the company directly because the auditor hopes to gather statements or evidence favorable to the tax office without the barrier of the company’s tax accountant.
What is more, contacting the company directly without going through its tax accountant is not illegal, so this tactic is used frequently.
The purpose of a tax audit is
“To ensure proper and fair taxation.”
Wonderful. However, auditors also have incentives tied to their own evaluations and commendations...
What did you think?
This is important, so let’s say it once more. Please say it out loud.
“I leave everything to our tax accountant, so please contact them.”
If you cannot respond appropriately in situations like this, you have to wonder what the point is of all those day-to-day discussions with them about this and that. Even when your tax accountant is absent, the natural reaction to a sudden request from the tax office is to think that you should deal with it yourself. You need to take care because the “proper response” runs counter to that natural reaction.
Let’s work together toward the best approach.
The “Lion’s Mouth” pictured below, in the Doge’s Palace in Venice, was an anonymous denunciation box. People wrote down information about someone who was improperly concealing income and dropped it into the mouth. It was used to uncover tax evasion. Its eyes look like those of a fierce temple guardian, don’t they?
