There was news that approximately ¥800 million belonging to the head of Kudokai had been seized by the Fukuoka Regional Taxation Bureau.
Interviews with investigative sources on the 10th revealed that, in a tax-evasion case involving “tribute payments” collected from members of affiliated organized-crime groups, the Fukuoka Regional Taxation Bureau had seized approximately ¥800 million from the personal accounts of a defendant in their 60s who led Kudokai, a designated especially dangerous organized-crime group in Kitakyushu. The defendant had been indicted on charges including violation of the Income Tax Act.
According to investigative sources, a tax investigation by the Fukuoka Regional Taxation Bureau found that the defendant had failed to pay approximately ¥550 million in income tax on income earned during the seven years through 2014. Approximately ¥800 million, including heavy additional taxes, was assessed.
This is quite an interesting case from a tax perspective.
PTAs, alumni associations, neighborhood associations, neighborhood watch groups, clubs, and similar groups are not taxed if they have no profit-making business
In the world of tax, “unincorporated associations, etc.” (to put it simply, PTAs, alumni associations, neighborhood associations, neighborhood watch groups, and the like) are taxed only on businesses conducted for profit.
There is no clear line drawn here, so, for example, even if a neighborhood association holds a seminar at its meeting hall and charges an attendance fee, it can be explained as not being a profit-making business if the fee is not large and the content is for purposes such as hobbies or education. Basically, it is tax-free.
In fact, Kudokai would presumably be treated as an unincorporated association, so tribute payments have a nature similar to neighborhood association dues and are basically tax-free.
In this case, the investigation found that tribute payments had been transferred to accounts connected with the group’s leader, and the authorities brought the case on the view that the money was income belonging to that individual.
During this investigation, detailed records left by a member said to have been Kudokai’s treasurer were found.
They meticulously recorded the flow of money, including how Kudokai collected tribute payments and how much was transferred to accounts connected with this suspect.
This became one of the decisive factors in treating part of the tribute payments as income belonging not to the organization but to the suspect personally, leading to the tax-evasion case.
Money management that will be required of neighborhood associations and clubs in the future
If this view becomes established, transferring neighborhood association dues and similar funds to an individual’s account, with no clear use of the funds, will lead to enforcement action for violation of the Income Tax Act. Neighborhood association dues are very often held in a bank account in the name of the individual chairperson (because it is not easy to open a bank account in the name of a neighborhood association), so unclear use of the funds is unacceptable. Also, be careful, because activities such as trips funded with neighborhood association dues that might be regarded as personal travel under the name of an inspection visit may be judged to involve personal money.
What did you think? The world is always changing.
I have explained the management needed for PTAs, neighborhood associations, neighborhood watch groups, alumni associations, and clubs—“unincorporated associations, etc.” that collect dues—to avoid enforcement action, even though they previously posed no problem at all.
This case may prove to have been needless concern depending on the outcome of the trial and other factors, but the statute of limitations for malicious tax evasion is seven years. There is no harm in taking solid measures now.