ドキュメント1 2006.08.18 17:09 ページ 1

National Tax Agency Report2006

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To Our Nation’s Taxpayers
Since its establishment, the National
Tax Agency (NTA) has administered thenation’s taxation system with the aim ofachieving its mission of helping taxpayers
to properly and smoothly fulfill their tax
responsibility. With the reform of Japan’scentral government in 2001, we established and publicized implementation
standards and other regulations concerning the operations under our authority. In
addition, we set performance targets forour organization and then conducted performance evaluations against those targets
and released the results to the public.
Based on the fundamental awarenessthat the NTA has been entrusted with tax
administration by the people of Japan, the reform was designed to:(1) fulfill the NTA’s responsibility to clearly explain its mission, performance targets, and policy
measures to the people of Japan;(2) provide an efficient and high-quality tax administration tailored to the needs of the times by
objectively evaluating all NTA operations; and(3) streamline work flow, raise the morale of tax officials, and revitalize the NTA organization.
The environment surrounding our tax administration is markedly changing, as seen in the lowbirthrate and aging society, economic globalization and so on. Against this background, the number ofself-assessment taxpayers is significantly increasing, and cases of taxation and collection are becoming increasingly complicated and difficult. In order for the NTA to discharge adequately their mission
in the future, it is important to properly continue tax administration by allocating limited resources
effectively and efficiently. From this viewpoint, we consider it necessary to improve the convenienceof taxpayers and ensure a full workload for examination and collection by improving the efficiency of
the internal operation of Tax Offices to the extent possible.
From the viewpoint of supporting the return filing and tax payment of taxpayers upon improving theconvenience of taxpayers, the NTA is striving to enhance taxpayer services by utilizing information
technology (IT), such as by providing tax information through the NTA website, and the introduction
or improvement of the e-Tax system for online tax return filing and tax payment, as well as the Filing1

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Assistance on the NTA Website. Concerning e-Tax, based on the “New IT Reform Strategy”, decided
by the IT Strategic Headquarters of the government, the NTA publicized the procedures related tonational tax as part of the “Action Plan for Promoting the Utilization of Online Procedures.” The NTA
will actively proceed with various measures in order to promote the further use of e-Tax to achieve thegoal incorporated in the said Action Plan.
Because it was anticipated that the number of self-assessment taxpayers would increase significantly during the filing period for 2005 final tax return, due to revision of the consumption tax law, theNTA enforced various measures, emphasizing publicity, consultation and guidance, so that taxpayers
who became newly taxable enterprises for consumption tax could properly file tax returns and pay
taxes. Thanks to such measures, a great part of taxable enterprises filed tax returns, and the filing period for 2005 tax return ended almost successfully.
With the globalization of world markets in recent years, the double taxation risk is increasing, butwhereas, the number of tax evasion or avoidance cases is also increasing by taking advantage of complicated cross-border transactions. Accordingly, it is increasingly necessary to deal appropriately withthese international taxation problems. However, there is a limit to how the tax authorities of one country can singly deal with such problems. Therefore, the NTA is addressing such problems in cooperation with foreign tax authorities by actively exchanging information, taking every opportunity
available including international conferences. In addition, the NTA is actively providing technicalcooperation such as dispatching experts to and receiving trainees from developing countries, chiefly
the People’s Republic of China and Southeast Asian countries.
National Tax Agency Report 2006 was compiled for the purpose of explaining the NTA’s measures
to taxpayers in an easy-to-understand format, and it focuses on the following:(1) the NTA’s future policy for tax administration, and(2) areas for improvement in the current administration.
The NTA’s mission is to help taxpayers to voluntarily and properly fulfill their tax responsibility
under the self-assessment system. I hope that this National Tax Agency Report 2006 deepens taxpayers’ understanding of their taxes.
June 2006

Yukitoshi Kimura
Commissioner
National Tax Agency2

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Contents
To Our Nation’s Taxpayers

page

1

I Mission of the National Tax Agency page 5<Major Undertakings>
1 Addressing Internationalization ....................................................................................................... 9
2 Promotion of Online Tax Return Filing and Tax Payment Using IT ..................... 10
3 Undertaking for Enforcement of the Revised Consumption Tax Law ................ 10

II Self-Assessment System
1 Public Relations, Tax Consultations,and Information Provision .......................................... 12(1) Tax Education(2) Briefings for Taxpayer(3) Browsing the Road Rating Map on the Internet(4) Tax Consultations at Tax Counsel Offices(5) Responses to Taxpayer Advance Inquiries
2 Making the Filing of Returns
More Convenient .............................................................. 15(1) Promoting Self Completion of Tax Returns(2) Weekend Tax Consultations
3 Utilization of IT such as e-Tax ................................ 17(1) Improvement in Convenience of Taxpayers by
Utilization of IT(2) Review of Operations and Systems related to
the National Tax Administration
4 Promotion of Proper andFair Tax Administration ................................................ 20(1) Guidance(2) Strict Treatment of Unscrupulous Taxpayers

III Tax Administration
2 Addressing Procedures under
Tax Conventions ................................................................. 31(1) Preventing International Double Taxation—
Implementation of Mutual Consultations Based on
Tax Conventions(2) Exchange of Information Based on Tax
Conventions311(3) Information(4) Enterprise Groups Engaged in Wide-Area
Transactions(5) Electronic Commerce Transactions(6) Tax Criminal Investigations
5 Payment of Taxes ............................................................ 25(1) Fostering a Cooperative Attitude Regarding
Self Initiated Tax Payment(2) Measures to Address Tax Delinquency(3) Tax Payment Call Centers(4) Efficient Management of Tax Claims andLiabilities
6 Roles of CPTAs ................................................................. 27(1) Promoting Attachment of Return Working
Paper to Tax Returns(2) Proper Guidance and Supervision for CPTAs
7 Cooperation with Relevant Private
Organizations ...................................................................... 28

in the Era of Globalization

1 Developing Common Tax Rules ................................ 29
Developing Common Tax Rules

page

page

29

3 Addressing International Tax Avoidance ............. 32(1) International Tax Avoidance Schemes(2) Transfer Pricing Issues
4 Technical Cooperation
to Developing Countries ................................................ 34国税庁2006̲E̲0802 2006.08.18 17:19 ページ 4of Taxpayer Rights

page

35

page

38

Mission of the National
Tax Agency

IV Remedy for Infringement(1) Requests for Reinvestigation(2) Requests for Reconsideration(3) Litigation(4) Case Trends

the Liquor Industry

Self-Assessment System

V Administration ofpage

Remedy for Infringementof Taxpayer Rights

VI Future Challenges

Tax Administrationin the Era of Globalization(1) Measures for Improving the Managerial Makeup of the
Liquor Industry(2) Support to Improvement in Management(3) Ensuring a Fair Trade Environment(4) Cooperation with the National Research Institute ofBrewing (NRIB)(5) Responding to Social Demands(6) Partial Review of Liquor Licenses

43

VII Statistics

page

Administrationof the Liquor Industry(1) Improving Tax Payment Environment(2) Overhauling Back-office Operations inside Tax Offices(3) Overhauling Tax Examination and Collection(4) Improving NTA Officials’ Work Environment

47

Future Challenges
Statistics(1) Tax Revenue and Budget(2) Taxation and Status of Tax Return Filing(3) Tax Examinations(4) Tax Criminal Investigations(5) Reduction of Tax Delinquency(6) Remedy for Infringement of Taxpayer Rights(7) Tax Consultations(8) International Taxation(9) Taxpayer Satisfaction(Reference) Information for Taxpayers Who Are Going to
Use e-Tax4

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I Mission of the National Tax Agency
Helping Taxpayers to Voluntarily Fulfill Their Tax
Responsibilities Properly and Smoothly
Public services are indispensable to support the lifestyle the Japanese people enjoy today, andthe national and local governments conduct a variety of public administration activities to provide
those services. Taxes provide the revenue to cover the expenses incurred in those activities. The
Constitution of Japan stipulates that tax payment is an obligation of the people of Japan, and the
NTA is given the authority to collect taxes so that these public services can be provided smoothly.
The mission of the NTA is to help taxpayers to voluntarily fulfill their tax responsibilities properly and smoothly. In order to fulfill its mission as mandated by the people, the NTA has tried toproperly and fairly impose and collect internal tax through tax education, public relations andother activities (taxpayer services) to help taxpayers understand and fulfill their tax responsibilities, and through activities (for promotion of proper and fair tax administration to maintain andimprove taxpayers’ compliance*1 with tax laws) to implement accurate instructions and examinations regarding taxpayers alleged to have failed to properly fulfill their tax responsibilities. The latter activities are designed to prevent good taxpayers from feeling unfairness regarding taxation.
The NTA has also tried to guarantee the sound development of the liquor industry and the proper
management of CPTAs’ services. The ultimate aim of all these efforts is to develop taxpayers’
understanding of our tax administration and to gain their trust.
To this end, the NTA is making efforts to perform its duties giving the staff the “Mission of the
National Tax Agency” *2 that summarizes plainly the mission mentioned above and has furthermore made it public.

National Tax Agency*1 “Compliance” means that taxpayers fulfill voluntarily and properly their tax responsibilities provided for in the laws with a high-level of awareness of such
responsibilities.
*2 The “Mission of the National Tax Agency” means the document that mentions the “Directive on Standard and Rules for Implementation of the National Tax
Agency’s Duties” including the code of conduct for the duties to be performed by the staff (See page 6).

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Mission of the National
Tax Agency

Mission of the National Tax Agency
Mission: Helping Taxpayers to Voluntarily Fulfill Their Tax Responsibilities Properly and Smoothly

Assignment● In order to fulfill the mission mentioned above, the NTA discharges the duties provided for in Article 19 of the Ministry of
Finance Establishment Law, paying attention to transparency and efficiency.
1. Realize the proper and fair assessment and collection of national taxes(1) Improve the tax payment environment(i) Publicize the interpretation of laws and procedures regarding tax return filing and tax payment to taxpayers in aneasy-to-understand, accurate manner.
(ii) Respond promptly and accurately to taxpayers’ inquiries and consultations.
(iii) Endeavor to secure the wide-ranging cooperation and participation of relevant government agencies and various layers of people in order to gain a wide scope of understanding and cooperation regarding the roles of taxes and thetax administration.
(2) Promote proper and fair tax administration:(i) In order to realize proper and fair taxation:
a. Apply the relevant laws and ordinances properly.
b. Endeavor to realize proper tax return filing, and correct errors reliably by implementing accurate tax examinations
and guidance for taxpayers whose tax returns are identified as improper.
c. Endeavor to help taxpayers pay their tax by the due date, and collect delinquent tax reliably by implementing procedure for tax delinquency against taxpayers failing to pay tax by the due date.
(ii) Respond properly and promptly to taxpayers’ requests for reinvestigation to address infringements of taxpayers’
legitimate rights and interests.
2. Sound development of the liquor industry(i) Endeavor to ensure the stability of the liquor industry’s business infrastructure, the research and development ofbrewing technologies, and the quality and safety of liquors.
(ii) Endeavor to ensure the effective utilization of resources regarding liquors.
3. Proper management of CPTAs’ service
Endeavor to guarantee the proper management of CPTAs’ service so that having a mission; they can play a key role in the proper and smooth operation of the self-assessment system.

Code of Conduct● Fulfill the duties mentioned above in compliance with the code of conduct mentioned below.
(1) The code of conduct upon performing duties(i) Endeavor to ensure the transparency of the tax administration so that taxpayers can be aware of the interpretation oflaws and regulations and administrative procedures concerning self-assessment and tax payment.
(ii) Endeavor to improve the convenience of taxpayers in the case of self-assessment and tax payment.
(iii) Endeavor to reform the operating management to improve the tax administration efficiency.
(iv) Endeavor to collect positively and make the most of the data and information to appropriately conduct examinationand implement procedures against tax delinquency.
(v) Deal strictly with taxpayers who are engaged in unscrupulous tax evasion and tax delinquency.
(2) The code of conduct for officials(i) Respond faithfully with taxpayers.
(ii) Maintain the confidentiality of the information obtained in the course of conducting duties and maintain official discipline in a spirit of strict fairness.
(iii) Endeavor to learn expert knowledge that is needed to perform the duties.

Challenges● To deal appropriately and flexibly with changes in the economic and social structure caused by highly-networked information and internationalization. Furthermore, in order to meet the needs of taxpayers, to review incessantly and strive toimprove the organization and management of the tax administration.

6

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NTA Budget and Personnel
The fiscal 2005 NTA budget was ¥715.7 billion, the majority of which was spent on personnel expenses. In
recent years, the KSK System (Kokuzei Sogo Kanri [Comprehensive Tax Administration] System) and other ITrelated expenses have come to comprise an increasing amount of the budget, and we are focusing on raising theefficiency of operations and improving taxpayer services.
NTA personnel numbered around 52,000 from the 1970s through the first half of the 1980s. With the introduction of the consumption tax in 1989, personnel figures increased and peaked in 1997. As of the end of fiscal 2005,
the NTA staff numbered 56,185.
(Reference)

1975

1997

2005

2005/1975

Budget (¥ Billion)

236.0

654.8

715.7

303.3%

Number of personnel

52,44057,20256,185107.1%(1) Number of Income Tax Returns Filed (Thousand cases)

7,327

20,02323,181

316.4%(2) Number of Corporations (Thousand cases)

1,482

2,793

2,949

199.0%(3) Number of Establishments
Subject to Commodity Tax (Thousand cases)

117

—

—

—

(4) Number of Enterprises
Subject to Consumption Tax (Thousand cases)

—

2,521

3,869

—

8,926

25,33729,999336.1%(1)+(2)+(3)+(4) (Thousand cases)

Notes: 1. The number of corporations is the figure as of the end of June 2005.
2. The figures for item (4) are the number of Notifications of Taxable Enterprise Status.
3. The figures under “(Reference)” are the fiscal 2005 percentages, based on a value of 100 for fiscal 1975 figures.

National Revenue and Taxes● National Revenue● National Expenditure

Fiscal 2004 General Account Revenue(settled account)

Fiscal 2004 General Account Expenditure(settled account)

Others
7.8(8.8%)

Revenuefrom
Government
Bonds*
35.5(39.9%)

Total

88.9
(¥ Trillion)

Tax
Revenue
45.6(51.3%)

Others 1.3%
Customs Duty 1.8%
Tobacco Tax 2.0%
Motor Vehicle
Tonnage Tax 1.6%
Gasoline Tax 4.8%
Stamp Revenue 2.5%
Liquor Tax 3.6%
Inheritance Tax 3.2%

Surplus, etc.
4.0

Tax
RevenueWithholding
Income Tax
26.7%

45.6
Consumption
Tax
21.9%

(¥ Trillion)

Corporation Tax
25.1%
Self-Assessed
Income Tax
5.5%

Subsidy at the timeof repayment of thereform promotion
public works projectbonds National
Debt
1.3
Service17.5

Others
6.9

SocialSecurity
20.3

Total

88.9
(¥ Trillion)

PublicWorks
8.2

Local Allocation
Tax Grants
17.7
Economic Assistance 0.9

Educationand Science
6.1
National Defense 4.9

Government Employee Pensions 1.1

Note: “Revenue from government bonds” is revenue from construction bonds, which areissued to cover public works expenditure, and special deficit-financing bonds, which areissued to cover shortfalls in revenue. All revenue from government bond issues constitutes a debt that must be paid back in the future.

National revenue (general account revenue) in fiscal 2004 was ¥88,897.5 billion. Of this revenue, ¥45,589.0 billion were from tax.
Deducting tax and stamp revenue from the customs and the Japan Post, revenue from national taxes aloneamounted to ¥40,313.6 billion. This means that the NTA collects about 88 percent of government revenue throughtaxation.
Income tax, corporation tax, and consumption tax account for about 80 percent of tax revenue.

7

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The NTA is responsible for the nationwide administration of tax and oversees the 12 Regional Taxation Bureaus
and 524 Tax Offices.
(Local Branch Offices)

Regional Taxation Bureaus(11)
National Tax Agency(Sapporo, Sendai, Kanto-Shinetsu,
Tokyo, Kanazawa, Nagoya, Osaka,
Hiroshima, Takamatsu, Fukuoka,
Kumamoto)

The NTA performs tax planning andstandardizes the interpretation of tax
laws to facilitate the execution of tax
administration. The NTA also oversees
the Regional Taxation Bureaus andTax Offices. (669 personnel, 1.2%)*1

The Regional Taxation Bureaus oversee
the Tax Offices within their jurisdiction.
The bureaus also carry out front-line
operations, including providing tax consultations and other services to taxpayers, carrying out tax examinations oflarge-scale, inter-prefectural, and difficult cases, and conducting proceduresfor tax delinquencies.*3(10,717 personnel, 19.1%)(Internal Subdivisions)
Commissioner’s Secretariat

Management andCo-ordination Department

Tax Offices(518)

The Tax Offices, which serve as liaison offices for taxpayers, are frontline administrative institutions incharge of carrying out national tax
administration. (43,979 personnel,
78.3%)

Co-ordination Division

Taxation Department
Taxation Department
Revenue Management
and Collection Department
Large Enterprise Examination andCriminal Investigation Department

The Sapporo, Sendai, Kanto-Shinetsu,
Tokyo, Nagoya, Osaka, Hiroshima, andFukuoka Regional Taxation Bureaus havea First Taxation Department and a Second
Taxation Department.

Revenue Management andCollection Department(Councils, etc.)

Special Officer(Public Relations)
Revenue Management
and Collection Group
Individual Taxation Group

Large Enterprise
Examination Department

Property Taxation Group

Criminal Investigation
Department

Corporation Taxation Group

National Tax Council*2(Facilities)
National Tax College
The National Tax College trains
tax officials. (342 personnel, 0.6%)(Attached Institutions)
National Tax Tribunal
The National Tax Tribunal makes
decisions on requests for reconsideration from taxpayers regarding national taxationrelated penalties imposed by the
Regional Taxation Bureaus, theTax Offices, and other institutions.
(478 personnel, 0.9%)(Except for at the Tokyo, Nagoya, and Osaka Regional Taxation Bureaus, the Large
Enterprise Examination and Criminal Investigation Departments are combined into
one department.)

Chief Examiner(Liquor Tax and Industry)

The Information and Examination Division of the Taxation Department carries
out examinations of difficult cases.
The Revenue Management and Collection Department carries out procedures
for large-scale tax delinquencies.
The Large Enterprise Examination Department carries out examinations oflarge enterprises and others.
The Criminal Investigation Department
carries out investigations and examinations based on the National Tax Violations Control Law and enforces regulations in the case of violation.

Okinawa Regional Taxation OfficeTax Offices (6)*1 The number of persons for each department shows the prescribed number of persons for fiscal 2005, and the percentage shows its proportion to theprescribed number of the NTA as a whole.
*2 The National Tax Council performs the following: (1) studies and deliberations at the request of the NTA Commissioner in cases where the DirectorGeneral of the National Tax Tribunal gives a decision that interprets the law in a different way from the directives issued by the NTA Commissioner, (2)enforcement of CPTA examinations and deliberations on disciplinary actions against CPTAs, and (3) deliberations on the establishment of labelingstandards for liquor and other issues.
*3 If taxes are not paid by the due date, they are deemed delinquent. To collect delinquent national taxes, taxpayer assets may be seized and converted
into cash through public sales or collection of claims, and the cash proceeds collected as taxes. This series of procedures is referred to as “procedures for tax delinquencies.”

8

Mission of the National
Tax Agency

Structure of the National Tax Agency

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Major Undertakings
The NTA is tackling various tasks in order to deal with changes in the economic and social
structure, caused by the rapid development of internationalization and highly-networked information, and the increasing number of filers, accompanied by a reduction in the tax exemption sales
threshold for enterprises subject to consumption tax or a review of taxation on the pension system.
In fiscal 2005, the NTA in particular enforced various measures for dealing with internationalization, promoting online tax return filing and tax payment using IT and undertaking enforcementof the revised consumption tax law.

1

Addressing Internationalization(1) Addressing International Tax AvoidanceInternational tax avoidance of reducing tax liability
by cleverly taking advantage of differences between
national tax systems and the tax conventions is developing into a major international issue. Furthermore, it is
becoming increasingly necessary to properly deal with
the international double taxation issue.
In order to deal with such issues, the NTA is addressing the development of common taxation rules concerning international transactions in cooperation with the tax
authorities of foreign countries. At present, the Japanese
government has tax conventions with 45 foreign countries, with information exchange provision incorporated
in 44 tax conventions among them. Such informationexchange is becoming ever-more important in recent
years. The Japanese government, too, is positively undertaking the promotion of information exchange.
Specifically, from the viewpoint of the tax system, infiscal 2003, the Japanese government created theauthority to make inquiry and inspection in order todeal with the requests of other parties regarding the tax
convention, even where there is no domestic tax interest. Furthermore, in fiscal 2006, the NTA establishedinformation collection procedures in order to deal withinformation requests for the purpose of investigating
tax crime. These actions have enabled our country todeal more smoothly with requests to provide information by other countries to the tax convention, and an
environment has been formulated to facilitate positive
cooperation from other countries involved in the tax
convention.
From the viewpoint of administration, the NTA also
set up an information exchange team in theInternational Operations Division in July 2005, and iscooperating closely with other countries in the tax convention to speedily deal with matters.
Taking action on the policy mentioned above, the
NTA is trying to grasp the actual state of internationaltransactions taking every opportunity available. Where
9

A scene of delivering a lecture at the International Seminar on Taxation(ISTAX)

it is recognized that there are problems for taxation purposes, the NTA will make a close examination andcope with such problems in strict fairness.

(2) Technical Cooperation to Developing Countries
Improving the tax system and tax administration indeveloping countries will contribute to the economic
development of these countries through strengthening
the fiscal basis. If the tax authorities of developing
countries and our country have a common understanding on tax rules, it is expected that international taxation problems will be prevented from occurring, andthat the Mutual Agreement Procedure will rapidly
progress. To this end, the NTA is positively providing
technical cooperation to developing countries. In recent
years, in addition to the International Seminar on
Taxation (ISTAX) that has been held since 1968, theNTA provides training individually to neighboring
Asian countries and has been closely cooperating withthem, taking full account of the actual state of affairs
and tasks of these countries (for further information,
see page 29).

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In order to help reduce taxpayers’ tax return filing and tax payment burdens, the NTA has been trying to take advantage of IT systems, including the e-Tax system for online tax return filing and tax payment and the “Filing Assistance on the NTA Website”.

(1) e-Tax
e-Tax is the system by means of which taxpayers cantake procedures on the Internet concerning national
taxes such as the return filing of income tax, corporation tax, etc., tax payment of all tax items and various
applications and reports. This system was improved toenable taxpayers to take online procedures for notification of start using e-Tax in January 2006.

In future, the NTA will widely perform publicity andcommunication activities to diffuse and extend the further utilization of e-Tax, and try to increase the convenience of users by improving function and operationfrom a user perspective (for further information, seepage 17).

(2) Filing Assistance on the NTA Website
The Filing Assistance on the NTA Website is thesystem by means of which taxpayer can prepare tax
returns and compile financial statements on the NTA
website. During the filing period for 2005 final return,
the NTA, in response to opinions and requests put forward by taxpayers, improved the system to enable tax-

3

payers to submit the final returns printed out by amonochrome, as well as color printer to the Tax
Office. Furthermore, the NTA installed equipment sothat taxpayers who have no personal computer at theirown house can use one at the Tax Office (for further
information, see page 18).

Undertaking for Enforcement of the Revised
Consumption Tax Law

Because it was anticipated that the number of taxpayers becoming newly taxable enterprises for consumption tax would increase significantly during thefiling period for 2005 final tax return, accompanied byenforcement of the revised consumption tax law, theNTA regards measures for dealing with the increasing
number of taxpayers as one of its top priorities, andhas multilaterally implemented various measures, suchas publicity, consultation and guidance, to smoothly
establish the system.
Specifically, the NTA gave notice of the content of
the revised consumption tax law to taxpayers who
become newly taxable enterprises immediately afterrevision, promoted publicity activities utilizing various
media and held various briefings so that they can correctly perform bookkeeping and keep the relevant documents. Furthermore, in fiscal 2005, the NTA enforced
various measures to facilitate the proper implementation of filing and tax payment, such as holding final
return briefings, saving funds to use for tax payment
and encouraging tax payments to be made by transfer
account.
These efforts of the NTA resulted in more than 96%

of the 1.22 million taxpayers expected to become new
taxable enterprises filing final consumption tax returns,
meaning the filing period for 2005 final tax return
ended almost successfully. The total number of consumption tax returns for the 2005 calendar year by sole
proprietorships was around 1.58 million and that ofcorporations, around 2.02 million*1. Compared with thefigures for 2004, the former increased around 1.16 million and the latter, around 0.49 million.
● The Number of Consumption Tax Returns(Thousand returns)
2,400

2,020
1,580

1,600

1,530

800

420
0
Sole Proprietorships

Corporations■ For 2004 ■ For 2005

*1 The number of returns by corporations was counted as those having settled accounts during the period from March to the following February (The number ofreturns for 2005 is the preliminary figure, as of May 30, 2006).

10

Mission of the National
Tax Agency

2

Promotion of Online Tax Return Filing and Tax Payment
Using IT

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II Self-Assessment System“Taxpayer Services” and “Promotion of Proper and Fair Tax
Administration”: the Two Cornerstones of the SelfAssessment System
Japan employs the self-assessment system for its national taxes. Under this system, the taxpayer
determines and pays tax based on the income and other information he or she submits to the Tax
Office. For local taxes, however, the official assessment system is generally used. Under that system, the tax amount is determined by the municipality in which the taxpayer resides.
Concerning national taxes, the official assessment system was also adopted before World War II,
and the tax authorities assessed the amount of taxable income and gave notice of the tax amount totaxpayers. In 1947, however, in order to democratize the tax system, the self-assessment system
was adopted for three taxes - income tax, corporation tax and inheritance tax - and was subsequently adopted for almost all national taxes.
For the self-assessment system to function properly, two things are necessary: First, taxpayers
must have a high level of awareness regarding tax payment and voluntarily and properly fulfill
their tax responsibilities prescribed by law (tax compliance). To help taxpayers to correctly file andpay their taxes by themselves, the NTA endeavors to improve taxpayer services, including tax education, tax counseling, enhancing convenience for filing, public relations activities about the significance of tax, and information on tax law and procedures.
Secondly, proper follow-up and examinations are necessary to check tax returns and guide taxpayers on how to file their returns correctly. In addition, if the national tax is paid later than thedue date, it is necessary to attempt tax collection without fail by demanding voluntary payment orby implementing procedures against tax delinquency. To this end, the NTA provides proper guidance on or makes an examination against taxpayers for whom any correction is needed, and performs procedures against tax delinquency in strict fairness after taking into account the individual
circumstances of the taxpayer. In this manner, the NTA is making efforts to promote fair andproper tax administration so as to realize fair and proper taxation.

A scene of taxpayers filing final returns at a joint service site with local government11

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1

Public Relations, Tax Consultations,and Information Provision

NTA Website (Top Page) (Japanese only)● Chief matters appearing on the
NTA website (Japanese only)[About the National Tax Agency]• Introduction on the National Tax
Agency[Report on Activities and Press
Release]• Press Release• Statistical Information• Evaluation of Performance of
the National Tax Agency[Information for Filing and Other
Procedures]• Information on Final Return• A Guide to Tax Treatment
Procedures• Procedures for Tax Payment
and Certificate of Tax
Payment• e-Tax(As of May 2006)● NTA Website Access Trends(Thousands of hits)
80,00077,76060,00043,11640,00020,04220,00013,408
8,119
0
2001

2002

2003

2004

2005

[Study on Tax]
• Tax Answer System• Examples of Questions andAnswers• Directives concerning
Interpretation of Laws andRegulations[Other Information]• Announcement concerning
Returns / Consultations• What’s New and Mail
Magazine Distribution Service

12

Self-Assessment System

To have taxpayers voluntarily and properly pay their taxes, it is vitally important that the NTA takes
advantage of every opportunity to enhance taxpayers’ understanding of their tax responsibilities. It isalso important that we provide information on tax and respond to questions on tax.
Therefore, the NTA allows taxpayers to obtain information that they want at any time. It also makes
wording of tax information easy for taxpayers to understand from their viewpoint. The NTA reflects
taxpayers’ opinions in its information services. It aims at and implements unified PR operations.
We employ a variety of PR media ranging from pamphlets which are available at Tax Offices andmunicipalities offices to taxpayer briefings, television, radio, and newspaper to provide information on
the significance and role of tax and the structure of the tax system.
Particularly, in addition to explanation on the activities being performed by the NTA, the NTA ismaking efforts to provide information helpful to taxpayers such as how to take procedures for filing
returns and paying taxes or examples of questions and answers by setting up the NTA website.

国税庁2006̲E̲0802 2006.08.18 17:21 ページ 13(1) Tax Education
Today’s children will lead and support Japan in
future years. To deepen their understanding of the significance and role of taxes and tax payment, the NTA
encourages educators to incorporate tax education in
their school classes.
To promote tax education, the NTA established theCouncil for Promotion of Tax Education, which iscomposed of representatives of national and local governments and educational organizations. The NTA also
holds classes on tax and publishes and distributes sup-plementary textbooks for tax education. For schoolsthat wish to tour a Tax Office or to try a hands-on experience of tax, we have set up permanent facilities exclusively for tax education at some Tax Offices. For
example, “Tax Space Ueno” at the Tokyo-Ueno Tax
Office gives students an opportunity to develop theskills to identify tax issues themselves, to learn andthink about those issues, and to independently judge
and resolve them. If the classes on tax are not being
held, anyone can tour the “Tax Space Ueno”.

(2) Briefings for Taxpayer
The NTA holds briefings for taxpayers to informthem about tax system reforms and deepen their understanding of tax administration.
Specifically, so that taxpayers can obtain the information necessary to undertake tax treatment proceduresat the time they need it, Tax Offices hold occasionalvarious briefings to provide tax information such as
briefings for preparing financial statements for taxpayers filing final returns or blue returns, year-end adjustment briefings for withholding agents, briefings for

explaining the revised tax laws, briefings for corporations that have been newly incorporated and so on.
● Number of Briefings and Participants(first half of the 2005 fiscal year)

Number of Briefings

Briefings

Of Which, Briefings
on the Revised
Consumption Tax Law

21,647

6,184

1,172

149

Number of Participants(thousand persons)(3) Browsing the Road Rating Map on theInternet
Article 22 of the Inheritance Tax Law provides that
assets acquired under inheritance or for other reasons
shall be valued at a fair market value. It is not always
easy for taxpayers to find the market price on their own
upon filing tax returns. Accordingly, from the viewpoint of meeting the convenience of taxpayers upon
self-assessment and ensuring fairness of taxation, theRegional Taxation Bureaus and the Okinawa Regional
Taxation Office have opened to the public the road rating map and evaluation coefficient table that are usedas the basis for the evaluation of land around Augusteach year.
The road rating maps and evaluation coefficient
tables throughout the country appear on the NTA website so that taxpayers can browse them on the Internet
at any time at their own house or office (Japaneseonly).
The browsing service of these road rating maps, etc.
on the Internet was commenced in October 2001, andthe number of accesses has subsequently been increasing year by year.

13● Internet Access of Road Rating Map, etc.
(Thousands of hits)
4,500

3,835
3,368
3,000

2,416

1,500

1,309

0
2002

2003

2004

2005

国税庁2006̲E̲0802 2006.08.18 17:21 ページ 14(4) Tax Consultations at Tax Counsel Offices
plans to improve the convenience of taxpayers such as
shortening waiting time until receiving an answer by
the centralized management system at the Telephone
Consulting Center.
● Tax Consultations at Tax Counsel Offices
in Fiscal 2005

Self-Assessment System

In order to answer and accommodate taxpayers’
questions and inquiries, the NTA has placed Tax
Counselors and staff with vast experience in all aspectsof tax at Tax Counsel Offices throughout the nation toprovide telephone and in-person tax consultations.
Consultations in English are provided at the Tax
Counsel Offices of the Tokyo, Nagoya, and Osaka
Regional Taxation Bureaus.
The NTA provides the information through “TaxAnswer System (Frequently-Asked Questions)” on theinternet or by voice telephone and facsimile. The
instructions, the telephone number table of voice telephones and facsimiles and the code table in which theinformation access codes are listed are available at thecounter of the nearest Tax Office or municipal office.
Furthermore, concerning tax consultations by telephone with which the Tax Counsel Offices and Tax
Offices are dealing individually at present, the NTA(Thousand cases, %)Telephoneand
In-Person

2,895
8.8%

Telephone
Recordingand Facsimile

230
0.7%

Total

32,776

Internet

29,652
90.5%(5) Responses to Taxpayer Advance Inquiries
The NTA provides information on the general interpretation and application of tax laws by publicizing
directives concerning the interpretation of laws and regulations or consultations at Tax Counsel Offices.
Furthermore, if it is unknown how the tax laws apply
to transactions actually conducted by taxpayers, Tax
Offices, etc. respond to advance inquiries. Among suchinquiries, if a taxpayer requests an answer in writing,

the Tax Office concerned answers in writing if the prescribed requirements are met, such as how a transaction
is applied when the tax law is not clarified by the existing directives concerning interpretation of laws, andpublicizes the contents of inquiries and answers, toimprove predictability for other taxpayers.
The number of inquiries to which taxpayers requested an answer in writing was 113 in fiscal 2005.

Responding to the Authorized NPO Corporation System
As the birthrate declines with the population aging and society becoming more diversified, private nonprofit services of nonprofit organizations have grown more important. In order to support NPO services by
allowing NPOs to accept external funds for their operations more easily, a special tax measure was createdunder the fiscal 2001 tax system reforms to deduct donations made to NPOs that are authorized by the
National Tax Agency Commissioner as meeting certain conditions. Such NPOs are referred to as “authorized NPOs.”
The conditions for authorizaton were relaxed under the fiscal 2002, 2003 and 2005 tax reforms. As
greater consideration was given to the environment surrounding NPOs, the conditions were further relaxed
under the fiscal 2006 tax reforms.
In a bid to secure the proper and smooth enforcement of the special tax measure, the NTA has distributed guidebooks and leaflets about application procedures and conditions for authorization and put a listof authorized NPOs on its website. The agency has also set up counters at Regional Taxation Bureaus
throughout the nation and the Okinawa Regional Taxation Office for consultations about applications.

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国税庁2006̲E̲0802 2006.08.18 17:21 ページ 15

2Making the Filing of Returns More Convenient

The number of taxpayers who filed a final income tax return for 2005 reached 23.18 million, meaning
one in every six Japanese citizens filed such a return. More than 10 million filed a return for refund,accounting for more than half of all final returns submitted.
To respond to the increase and diversification of the number of income tax filers and to increase thesatisfaction of taxpayers, the NTA attempts to reduce the costs related to filing tax return as much as
possible and to provide even higher quality services than before.

(1) Promoting Self Completion of Tax Returns
Under the self-assessment system, it is crucial that
taxpayers understand the tax framework and pay theirtaxes. At tax consultations, NTA officials encourage
taxpayers to complete their own forms. To further
encourage taxpayers to fill out their own forms, we
completely revised the tax form starting with the 2001
final return form and simplified the items to be entered.
It is anticipated that the number of final returns willfurther increase in the future. To deal with these cir-

cumstances, the NTA plans to positively perform various measures whereby taxpayers can easily complete
their own returns, for example, e-Tax and Filing
Assistance on the NTA Website, to enable many taxpayers to voluntarily and properly file their returns. The
NTA is striving to vastly enhance the satisfaction of
taxpayers requiring consultation on self-assessment,
and considers it important to process work related to
tax returns efficiently using a limited number of staff.

Rising Number of Final Tax Returns Filed
Accompanied by the tax reform in fiscal 2003, the tax exemption sales threshold for enterprises subject
to consumption tax was lowered and the taxation on pension was reviewed. Due to these revisions, during
the filing period for 2005 final tax return, the number of income tax returns increased to 107.0% and that ofconsumption tax of sole proprietorships increased to 378.6% compared to the previous year.
● Changes in the number of returns filed by individuals and corporations(Millions)25

Individual (income tax+consumption tax)

24.76

Individual (income tax)
23.18

20

15

10

Corporation (corporation tax+consumption tax)
Corporation (corporation tax)

4.98 (Forecast)5

2.74 (Forecast)
0

15’67 ’68 ’69 ’70 ’71 ’72 ’73 ’74 ’75 ’76 ’77 ’78 ’79 ’80 ’81 ’82 ’83 ’84 ’85 ’86 ’87 ’88 ’89 ’90 ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05

国税庁2006̲E̲0802 2006.08.18 17:21 ページ 16(2) Weekend Tax Consultations
considering the efficient holding of consultations,regional differences and so on.
A questionnaire survey on the two Sundays’ services
indicated that many taxpayers including salaried persons
used the services to consult with tax officials on medical
expense and housing loan deductions and those users
welcomed and gave high ratings to the weekend services.
The NTA would like to fully review the information
gathered about the weekend consultations held during
the filing period for 2005 final tax return and announce
futures plans before the filing period for 2006 final tax
return.

Filing return for refund and request for correction
A taxpayer who does not have to file a final tax return may file a return for refund and receive the refund if a
withheld tax amount or an estimated tax prepayment exceeds a tax amount based on real annual income*1.
If a taxpayer finds that a filed tax return includes an excessive tax amount or a short tax refund due toerroneous overestimation of the tax amount, the taxpayer may request a correction to the tax return*2.
The NTA properly applies the relevant laws and properly and promptly processes filing returns forrefunds and requests for corrections to tax returns.

If a taxpayer encounters a disaster or the like(1) If a taxpayer cannot file a tax return or pay tax by the deadline for a disaster or a similar reason, the taxpayer may file an application with a competent District Director of the Tax Office. Upon approval by theDistrict Director of the Tax Office, the deadline may be extended for up to two months from the end of
the reason.
(2) If an earthquake, fire, windstorm, flood or any other natural disaster damages a taxpayer’s housing orhousehold goods, the taxpayer may choose (a) the deduction for casualty losses under the Income Tax
Law or (b) the tax reduction or exemption as provided in the “Law Relating to Tax Reduction andPostponement of Collection for Disaster Victims,” whichever is favorable, to get relieved of all or part ofincome tax.
(3) If a disaster or the like damages a taxpayer’s assets considerably or makes it difficult for a taxpayer to
pay their tax in a lump sum immediately, such taxpayers may file an application with a District Directorof the Tax Office, and by obtaining permission, receive a postponement of the tax payment deadline
and may be given a tax moratorium for a certain period of time.

Cooperation with local tax authorities
Some local taxes are levied on the same taxpayers and have the same tax framework as national taxes.
To simplify filing procedures, therefore, the national and local tax authorities cooperate closely in terms ofsystem structure and administration.
For example, in terms of the system structure, taxpayers who have filed income tax returns are notrequired to submit returns for sole proprietorship tax or individual inhabitant tax, both of which are local
taxes. Moreover, taxpayers can file their consumption tax and local consumption tax returns through a single procedure. In terms of administration, many municipalities offer consultations on income tax, and services related to national tax. In addition, the national tax and local tax authorities together hold briefings on
tax return filing and conduct tax PR. Cooperation in the area of administration is conducted based on consultations between the national tax authorities and the various local authorities, including prefectural andmunicipal officials.
*1 Additional refunds may be made if certain conditions are met.
*2 Taxpayers may request correction by submitting a written request for correction, specifying the details of the error, to the Tax Office.

16

Self-Assessment System“Tax consultations on weekdays only are insufficient. The consultations should be made available on
weekends.” In response to such requests by taxpayers,
the NTA has offered tax return consultation and reception services on two Sundays in February since the filing period for 2003 final tax return.
During the filing period for 2005 final tax return,joint service sites with local government and wide-area
service centers, as well as some Tax Offices, held consultations and accepted returns on two Sundays in
February after the NTA reviewed this service, taking
into account the performance of the previous year, and国税庁2006̲E̲0802 2006.08.18 17:21 ページ 17

3

Utilization of IT such as e-Tax

To ensure the self-assessment system operates smoothly, the NTA is trying to reduce taxpayers’ burden by promoting tax return filing and tax payment in which IT is utilized, such as the e-Tax system foronline tax return filing and tax payment, and “Filing Assistance on the NTA Website.”
Furthermore, in order to simplify and improve the efficiency of the tax administration or conduct
close examination and perform collections for tax delinquency smoothly, in addition to the utilization ofIT, the NTA will attempt to optimize operations and systems related to national tax by promoting operational reforms responding to IT development or the outsourcing of work.

(1) Improvement in Convenience of Taxpayers
by Utilization of IT(i) e-Tax
e-Tax is a system by means of which taxpayers can,through the Internet, take procedures for applications
and filings, such as the return filing of income tax andcorporation tax, application for the approval of blue
returns, and notice of changes in the place for tax procedures that were previously made in writing.
Furthermore, tax payment has been made at the counterof Tax Offices or financial institutions, but in the caseof e-Tax, it has become possible to do so by utilizing an
ATM connected with Pay-easy*1, Internet Banking andsimilar.
Taxpayers can take procedures for tax returns andtax payment at their own houses or offices without visiting the counter of a Tax Office or financial institution
by utilizing e-Tax. Furthermore, if using financial
accounting software compatible with e-Tax, taxpayers
can electronically perform a series of work, ranging
from accounting for or preparing data, such as tax
returns, to their submission, thus facilitating labor-saving and paperless operation.
In January 2006, the NTA improved the system sothat taxpayers could take procedures for notification ofstart using e-Tax online and eliminate the need for theidentifying documents requested for attachment whensubmitting a written notification of start using e-Tax.

Furthermore, during the filing period for final tax
return, in which e-Tax is intensively utilized, the NTA
extended the hours of online operation to 23:00 (21:00
normally) and configured the system to accept returns
at weekends, too.
Various opinions and requests have been put forward
by many taxpayers through questionnaires and others
concerning the utilization of e-Tax up to now. In orderto improve the convenience of users in the future, basedon the procedures related to the national tax prescribedin the “Action Plan for Promoting the Utilization of theOnline Procedure” (made public in March 2006)*2, theNTA will attempt to improve the function and operation of the system with plans to make attachments prepared by a third party online, to distribute e-Tax
software online, to provide incentives such as the early
payment of refunds, to accept tax returns 24 hours a
day for a filing period for final tax return, to makesome digital signatures unnecessary, and so on.
Furthermore the NTA will attempt development tomake the system available to more taxpayers, accompanied by the wide diffusion of public key infrastructure,such as the Public Certification Service for Individuals(for further information about the utilization of e-Tax,
see page 52).

*1 “Pay-easy” means the settlement service by which taxpayers can pay public utility charges, etc. that have been paid at the counters of financial institutions andconvenience stores by ATM of financial institutions or Internet Banking.
*2 “Action Plan for Promoting Utilization of Online Procedure” is the action plan made public that prescribes the procedures subject to utilization of online procedure, that is, those under which applications of more than 100,000 are made annually in accordance with the “Policy of Administrative Reform in the Future”(decided at a Cabinet meeting held on December 24, 2004) and “IT Policy Package 2005” (decided by the IT Strategy Headquarters on February 24, 2005).

17

国税庁2006̲E̲0802 2006.08.18 17:21 ページ 18● Trends in the number of tax returns filed via e-Tax(Number of returns)
250,000

25,370Self-Assessment System

200,000

100,104
150,000

1,795
100,000

Leaflet for publicity of e-Tax
43,162

6,712
11,03350,0002,482 (Income Tax)
54 (Corporation Tax)
521 (Consumption Tax)
12 (Applications,Notifications andOthers)4 (Tax Payment)

32,484
16,246

Original Character“Mr. e-Ta”
In order to establish the image of e-Tax,irrespective of generation or sex,

17,89834,842the NTA has adopted “Mr. e-Ta” as an
original character that is simple and18,694friendly and that can convey the0

Fiscal 2003

2004

2005

Returns of Income Tax
Returns of Corporation Tax
Returns of Consumption Tax (Individual, Corporation)
Returns of Lipuor Tax and Stamp Tax
Applications, Notifications and Others
Tax Payment
Note:The figure for fiscal 2003 is the total of the figure for Febuary and that for March 2004.

(ii) Filing Assistance on the NTA Website
The Filing Assistance on the NTA Website allows
taxpayers to complete their tax returns by entering thenecessary information in accordance with the procedure
displayed on the screen of a personal computer. The
amount of taxable income and tax are automaticallycomputed and the taxpayer can print out the tax returnto submit it as his or her final tax returns.
The tax return forms prepared can be sent by mail.
Furthermore, the taxpayer may relay data such as thetax return output to e-Tax to file it electronically.
Since the Filing Assistance service was introducedon the NTA website in the filing period for 2002 final

easiness and conveniece of e-Tax.
“Mr. e-Ta” is named after e-Tax, and thedesign is conceived by borrowing motifs
from “e” of e-Tax and the monitor screenof a personal computer.

tax return, the number of accesses has been increasing
year by year, and reached around 14.59 million in thefiling period for 2005 final tax return.
It is considered that this system contributes to thepromotion of preparing tax returns at the taxpayer’s
own house and a much greater diffusion of e-Tax.
The NTA continues to improve the services of theFiling Assistance on the NTA Website based on therequests of users so that it is becoming easier to use,
and NTA would like to improve it to become a systemthat is available to many more taxpayers.

18

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 19● Internet Access to the Filing Assistanceon the NTA Website(Trends from 2002 to 2005)(Thousands of hits)

14,59315,000

10,235

10,000

5,180

5,000

3,334

0
2002
(first year of service)

2003

2004

2005

A Screen of the “Filing Assistance on the NTA Website”(iii) Touch-Screen Computers
For taxpayers who are not able to use e-Tax or theassistance on the NTA Website, touch-screen computers for preparing tax returns have been installed at Tax
Offices making it possible for them to complete a tax

return simply by touching a computer panel in accordance with the instructions that appear on the screen,
like a bank ATM.

(2) Review of Operations and Systems related to
the National Tax Administration
In order to improve the convenience of taxpayers
and the simplification, efficiency, reliability and transparency of the government administration, the“Program for the Creation of Next-Generation
Electronic Government” was decided in July 2003. The
purpose of this plan is to attempt to optimize both operations and systems by reviewing each system and related operation in efforts to improve the efficiency ofoperations by promoting a far greater IT utilization.
Based on the review mentioned above, the NTA
established the following five basic policies. (i) To
attempt simplification and improvement in operational
efficiency for appropriate performance, (ii) To attempt
improvement in the convenience of taxpayers by utilization of IT, (iii) To attempt sophistication of the system related to examinations and collections of tax
delinquency through the utilization of IT, (iv) To
ensure stability and reliability of the system and information security, (v) To attempt reduction of expenses
related to the system and to ensure the transparency of

19

procurement. In line with the basic policies mentioned
above, the NTA developed and announced the“Optimization Plan of Operations and Systems related
to National Tax Administration” in March 2006.
Specifically, the NTA will promote unifying back-office
operation, simplification and centralization of management, outsourcing of operations, improvements in thefunctions and operations of e-Tax, integration of services provided at the counter for taxpayers (one-stop
service), promotion of a phased transition to open system, and so on.
By executing the policies mentioned above, the NTA
will simplify the management of tax administration andimprove the efficiency of operations, and in order todischarge appropriately the duties of the NTA of realizing proper and fair assessment and collection, willattempt further enhancement of examinations and collections of tax delinquency and attempt improvement in
the compliance of taxpayers.

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 20

4Promotion of Proper and Fair Tax Administration(1) Guidance
The NTA checks whether the information reported
in a tax return is complete and correct using information gathered from various sources. If unreported or
errors in reported information have been found, the Tax
Office requests the taxpayer by telephone or in writing
to submit an amended return. If the taxpayer refuses tocomply, then correction*1 or determination*2 by official
assessment will be made under the authority of theDistrict Director of the Tax Office.
The Individual Taxation Group handles about
550,000 cases a year (in fiscal 2004) of this kind ofbrief guidance with taxpayers.

(2) Strict Treatment of Unscrupulous Taxpayers● Unrecorded Income Tax and Corporation
Tax per Field Examination Case

To facilitate the smooth operation of the self-assessment system, the NTA has been granted the authority to
conduct tax examinations. Such examinations aim tocheck the content of tax returns based on the taxpayer’s
books and to correct any mistakes found. We give higher priority to the examination of unscrupulous taxpayers and make sure we invest sufficient number of dayson such cases.
The unrecorded income discovered through field
examination averaged ¥8,990 thousand per case forincome tax and ¥12,020 thousand for corporation tax infiscal 2004. Comparing this to 1999 figures, it is clearthat the amount of unrecorded income per examinationcase is on the rise.
In light of this situation, the NTA believes that it isessential to ensure a sufficient number of examinations
for proper and fair taxation. By singling out and conducting examination on taxpayers who are believed tobe filing improper returns, and thereby constantly keeping such unscrupulous taxpayers under our watchfulgaze, we believe that conscientious taxpayers’ willingness to pay tax could be enhanced leading to better taxpayer service overall.

(¥ Thousand)
15,00012,020133.4%
10,0008,990
143.4%

9,010

6,270
5,000

0
Income Tax

Corporation Tax■ 1999 ■ 2004

*1 If the tax and other figures declared in the tax return are too high or too low, a correction is issued by the tax authority in charge of the case.
*2 If a taxpayer who must submit a tax return fails to file by the deadline, a determination confirming the amount of tax is issued by the tax authority in charge ofthe case.

20

Self-Assessment System

To ensure proper and fair taxation, the NTA provides guidance regarding tax returns and payment
and implements rigorous examinations from various angles on taxpayers who attempt to evade their tax
obligations.
In selecting taxpayers for examination, we analyze their income tax and corporation tax returns
entered into the KSK System from the viewpoint of their industry type, business category, and businessscale.

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 21

Tax Examinations
In order to ensure proper and fair taxation, the NTA endeavors to conduct smooth tax examinations
through various efforts to properly deal with taxpayers and strictly manage taxpayer information.
(1) Advance Notice of Tax Examination
In principle, taxpayers are notified in advance of the date for the tax examination by phone so that we
can confirm the taxpayer’s availability. In cases where we must confirm the actual state of the businessitself, however, no advance notice is given. Advance notice is given in approximately 80 percent of income
tax examinations and about 90 percent of corporation tax examinations.
(2) How to conduct Tax Examinations
When a tax official visits the residence or office of a taxpayer to conduct a tax examination, the official
presents a photo identification card that clearly show his or her name and identity as a tax official. An
examination proceeds quickly and smoothly if the taxpayer cooperates by presenting books and otherdocuments that track daily transactions to the tax official in charge and responds accurately to questions
regarding the tax return and books.
To minimize the burden on the taxpayer, we make every attempt to conduct the examination as speedily
as possible. In principle, tax examinations are conducted in the presence of the taxpayer. The taxpayer
may also have his or her CPTA designated as tax proxy attend the examination.
(3) Actions to be taken after completion of Tax Examinations
When an error is found in the tax return, the Tax Office explains to the taxpayer the error and theamount of tax that should be paid, and recommends that the taxpayer amend and refile his or her filing
return after the due date. If a return is amended, no request for reinvestigation or reconsideration may beallowed (see Pages 35). In addition to the tax amount due, a delinquent tax may be imposed. Furthermore,
additional tax for understatement, for failure to file a return, or aggravated additional tax may be imposed.
When recommending a taxpayer to amend his or her return, the Tax Office provides written explanations.
If the taxpayer does not cooperate with the Tax Office’s request for an amended return, etc., the District
Director of the Tax Office makes a correction, etc., and sends a Notice of Correction or Notice ofDetermination by official assessment to the taxpayer.
When no error is found in the tax return, the Tax Office performs the following:a. If there is no need for submission of an amended return, but guidance is needed regarding future tax
returns or record keeping, or maintenance and storage of books and documents, the Tax Office provides the taxpayer with an explanation. The Tax Office also clearly communicates that the tax examination is closed.
b. If no error is found in the return and no guidance is needed, the Tax Office sends a written notification oftax examination findings to the taxpayer.

Strict Information Control
Revenue, sales, expenses, and other information involving taxpayers’ privacy are necessary for tax calculation. Information about taxpayers’ trading partners may sometimes be required for tax examinations. If
taxpayers’ privacy and information are leaked easily, taxpayers cannot be expected to cooperate with the
NTA. This may negatively affect smooth tax examinations.
Tax officials who have leaked confidential information they obtained through tax examinations are subject to a criminal penalty (up to two years in prison or up to ¥300,000 in fine) under tax law that is heavier
than the penalty (up to one year in prison or up to ¥30,000 in fine) under the National Public Service Law.
The NTA conducts regular training of tax officials to thoroughly inform them of such penalty provisions.
When interviewing taxpayers, tax officials give considerations to their privacy and refrain from interviewing
them at their shopfronts or at the front door of their homes.
As the “Act for Protection Computer-Processed Personal Data Held by Administrative Organs” tookeffect on April 1, 2005, the NTA has further enhanced its strict control of taxpayer information that it holds.

21

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 22

Treatment of Penalties and Exemption from Delinquent Tax
To encourage taxpayers to file tax returns and pay taxes properly, delinquent tax may be imposed if tax
returns are not filed or taxes are not paid by the due date. There are also cases where either a penalty forunderstatement, a penalty for failure to file, or an additional tax for fraud case is imposed.
● Delinquent Tax

After two months from the day after thedue date

Self-Assessment System

Up to two months from the day after thedue date

Annual rate of 4.1% (in 2006)* The annual rate may change due to financial andother conditions.

Annual rate of 14.6%● Additional Tax

Whether the Tax Return was
Filed by the Due Date

Regular Case

Case of Fraud, etc.

Return is filed by due date,but tax amount is understated

For understatement(10% or 15%)35%

Return is not filedby the due date

For failure to file (15%)*40%*Revised rates applicable to cases for which legal filing deadlines will come into effect after January 1, 2007 are 15% or 20%.

Where errors are not attributable to the taxpayer and a legitimate reason is found, then additional tax forunderstatement, additional tax for failure to file, or aggravated additional tax may not be imposed.
In cases where certain requirements are met, for example, a taxpayer may have been given a tax payment grace period after a disaster, or may have failed to file a return or pay a tax due to an erroneous guidance given by NTA officials, the taxpayer may be exempted from all or part of a delinquent tax
corresponding to the grace period.
The NTA has set up the rules for the cases where no penalty is imposed and has published the rules on
its website (Japanese only).

(3) Information
The NTA collects about 158 million new pieces of
information a year and we manage this information
together with tax return data in an integrated fashion
today inside the KSK System and use it for guidance
and tax examinations.
The geographical expansion, globalization and useof IT of economic transaction in recent years present
new information needs.
We determine what new kinds of information are
required to examine these new forms of transactions

and then actively collect it. For example, to respond to
the recent increase in transactions with overseas entities
accompanying the advancement of internationalization,
we actively exchange information with foreign tax
authorities and use it to check returns related to overseas transactions. Information substantiating off thebook or fictitious transactions and specific information
relating to individual or corporate transactions are particularly helpful in examinations.

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国税庁2006̲E̲0802 2006.08.18 17:22 ページ 23(4) Enterprise Groups Engaged in Wide-Area
Transactions

one form of the actual enterprise groups, and the needto ascertain intra-group transactions and the importanceof local information remains basically the same.
In examining enterprise groups and consolidated
groups engaged in wide-area transactions, the NTA
implements coordinated examinations on a nation wide
scale where parent companies and those subsidiaries
that require close attention are examined by maintaining close communication and coordination among thenational network of Regional Taxation Bureaus andTax Offices.
Businesses are rapidly expanding their area of activity in recent years along with internationalization andthe increasing use of IT. The NTA considers examinations of enterprise groups and consolidated groups as
an important issue for the future as well.

Enterprises are attempting business expansion widely by establishing subsidiaries and branches. The way
in which examinations should be made in these circumstances is one of the issues for the NTA.
In examining an enterprise group, it is important that
the NTA must first gain an overall picture of the group,
grasp the actual activities, and ascertain whether thegroup is conducting improper tax accounting by using
intra-group transactions.
For overseas subsidiaries, the NTA must consider
international taxation issues. The state of the local
economy and the subsidiaries’ ties with the community
are valuable information to the NTA to fully ascertain
the true situation of the subsidiaries. The consolidated
taxation system was introduced in August 2002. The
enterprise groups that file consolidated tax returns are

Consolidated Taxation System
With the dramatic changes in the business environment surrounding Japanese enterprises, theCommercial Code and other laws and regulations have been adjusted to facilitate corporate reorganizationand thereby to ensure that businesses remain competitive and can fully demonstrate their vitality. In theamendments made to the Corporation Tax Law as part of the fiscal 2001 tax reforms, necessary adjustments were also made, including the revision related to corporate spin-offs and mergers. Moreover, a consolidated taxation system was introduced as part of the fiscal 2002 tax reforms in response to the situation
today where corporations are expanding their operations as enterprise groups and corporate disclosure is
primarily performed via consolidated financial statements.
The consolidated taxation system was introduced in August 2002. This system views an enterprisegroup as a single corporation in the levying of tax. The NTA is improving the administrative framework for
responding to advance inquiries, and examining applications for approval so that approval applications andconsolidated tax returns are submitted properly. When examining consolidated enterprise groups, a competent Tax Office for parent companies and ones for subsidiaries try to maintain close communication andcooperation to conduct integrated examinations.
In fiscal 2004, examinations covered 87 enterprise groups.
● Applications for Approval on Consolidated Taxation(Cumulative total of applications)(For fiscal 2004)

800

7,249

8,000

Consolidated
Returns

6,383
686

600

5,096
3,891

400

2,896
200

6,000

548
4,000

384

282
2,000

164

0

0
September
2002

December
2002

September
2003

September
2004

September2005■ Number of applications (left scale) ■ Number of parents and sudsidiaries (right scale)23● Consolidated Taxation Returns

Reference

Number of Returns

331

Percentage of Returns Declaringa Surplus (%)

25.1

Reported Income (¥ Billion)

284.8

Non-Consolidated Income (¥ Billion) 1,350.1

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 24(5) Electronic Commerce Transactions(PROTECT) at each Regional Taxation Bureau. This
team collects information in both specialized and crosssectional ways from e-commerce service providers andothers, conducts tax examinations based on the information collected, and develops and accumulates examination methods. It also provides officials of each
Regional Taxation Bureau and Tax Office with information collected and various examination methods.

(6) Tax Criminal Investigations
To impose correct taxation on taxpayers who intentionally evade tax using illegal means and also to pursue criminal responsibility for such anti-social
behavior, the NTA may conduct examinations on thebasis of compulsory authority, using methods similar to
those used in criminal investigations. Such examinations will be conducted apart from the general tax
examinations, when evidence of evasion cannot be
obtained only by ordinary audit. Based on the findings,
the NTA may bring an accusation and request the prosecutors for public prosecution against the tax evader.
This is known as the tax criminal investigation system,
and it pursues the criminal responsibility of large-scale
and malicious tax evaders. Taking advantage of the factthat punishing one serves as a warning to others, thissystem plays an important role as the ultimate meansfor protecting the self-assessment system.
As transactions become more cross regional, international, and IT oriented, tax evasion methods havegrown more complex and diverse in recent years. Byenhancing and strengthening our information and con-ducting efficient examinations, the NTA endeavors toactively pursue criminal charges and prosecute largescale, malicious tax evaders.
In fiscal 2005, the NTA commenced 217 criminal
investigative examination cases and referred 150 cases
to the public prosecutor. Total tax evaded was about¥27.4 billion, with an evaded tax sum of ¥153 million
per case.
Notable tax evasion methods were intentional concealment of sales and recording of costs at unreasonably high figures.
Furthermore, examples of tax evasion related tooverseas transactions, tax evasion involved in consumption tax and tax evasion by failure to file are discovered.
In 2005, 156 cases were resolved at the court of first
instance, and in all of the cases, a guilty ruling washandled down. The average fine was about ¥25 million
per case, and the average prison sentence was 15.9
months. There were 7 cases with no suspended sentence. Prison sentences without probation have been
handed down every year since 1980.

● Tax Criminal Investigations

Fiscal Year

Number of Cases
Conducted

Number of Cases
ClosedNumber of Cases
Prosecuted

Total Tax Evasion(Number in parentheses
is total tax evasionin prosecuted cases)(¥ Million)

2004
2005

210
217

213
214

152
150

28,224 (24,680)
27,416 (22,960)

Tax Evasion per Case
(Number in parenthesesis tax evasion perprosecuted case)(¥ Million)

133 (162)
128 (153)

Note: Tax evasion figures include penalties.

● Judgments Handed Down in Tax Criminal Investigation Casesa

Calendar Year

(1) Number ofJudgments(2) Number ofConvictions(2)/(1) Percentage
of CasesConvicted

Convictions with
Prison Sentences
without Probation(3) Amount of Tax
Evaded per Case(¥ Million)(4) Average Prison
Sentence per
Person (Months)(5) Average Fine
per Case(¥ Million)

2004
2005

171
156

171
156

100.0%
100.0%

11
7

111
100

15.2
15.9

27
25

Notes: 1. The number of convictions with prison sentences without probation and (3)-(5) figures exclude those combined with non-tax crimes.
2. The “Amount of Tax Evaded per Case” is the amount of tax evaded through fraud and other illegal activities.

24

Self-Assessment System

As means of communication have become moresophisticated and communications costs have declined,
use of the Internet has increased dramatically, andtransactions via virtual shopping malls on the Internet
are spreading.
To collect information about the state of these kindsof electronic commerce transactions and to ascertain
the parties involved in the transaction, the NTA has set
up a Professional Team for E-Commerce Taxation

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 25

5

Payment of Taxes(1) Fostering a Cooperative Attitude Regarding
Self Initiated Tax Payment
National taxes for which returns were filed are treated as tax revenue only when they are actually paid to
the national treasury. In fiscal 2003, the tax amount of
national taxes filed to Tax Offices (the amount determined for collection) was around ¥44,760 billion, while
the amount of tax paid within the said fiscal year wasaround ¥44,330 billion. Accordingly, the rate of receiving tax was 99.0%. (This rate of receiving tax reached99.5% by the end of fiscal 2004, due to the executionof collection of tax delinquency.)
For national taxes, taxpayers file a tax return themselves and pay the tax by the filing due date using a tax
payment slip on which they write in the tax amountthemselves. For this reason, the NTA endeavors
through PR to make sure that taxpayers do not let the
tax payment deadline pass by accident. For sole proprietors that declare and pay tax on an ongoing basis, wesuggest tax payment by transfer account from theirdeposit accounts. Moreover, we are committed to further improving taxpayer services. From 2004, taxpayers
can perform tax payment procedures at their homes oroffices with e-Tax.

● Status of Tax Delinquency of the National
Taxes Being Handled
Fiscal 2003
The amount determined for collection (100.0%) [¥ 44,760 billion]

The amount paid within fiscal 2003 (99.0%) [¥ 44,330 billion](Breakdown)• The amount paid before a payment demand letter is issued (97.7%)[¥ 43,740 billion]• The amount of tax delinquency handled during fiscal 2003 (1.3%)[¥ 590 billion]

The amount of tax delinquency handled during fiscal 2004
(0.5%) [¥ 200 billion]
The amount of tax delinquency expected to be handled after fiscal 2005
(0.5%) [¥ 220 billion]

Furthermore, the NTA is making efforts to preventtax delinquency such as giving written previous notice
requesting tax payment within the due date to taxpayers
who paid tax after the due date in the previous year or
giving notice by telephone before sending a payment
demand letter to taxpayers who failed to pay tax within
the due date by mistake.

(2) Measures to Address Tax Delinquency
Tax delinquency means that national taxes are notpaid within the due date and a payment demand letterhas been issued. The amount tax delinquency wasaround ¥1,867.3 billion as of the end of fiscal 2004.
Allowing delinquent tax to go unpaid results in unfairness between delinquent taxpayers and the vast majority of taxpayers who pay their national taxes by thedeadline. In the end, this undermines the principles ofthe self-assessment system, namely, self declarationand payment. For this reason, the NTA endeavors tostrictly deal with tax delinquency while taking into consideration the unique situation of each taxpayer.
In the case that amount of the national tax is not paid
within the due date and is demanded by issuing a payment demand letter and furthermore, in the case that notax payment is made even after the tax payment isdemanded in writing or by telephone as the need arises,
the NTA may seize property of the delinquent taxpayer.
For taxpayers who are having temporary difficulty with
their tax payment because of natural disaster, sickness,or the suspension or closedown of business operations
due to economic circumstances, however, the NTA
25

deals with such cases in line with the actual state ofaffairs of the taxpayer such as allowing installments fortax payment, as a measure to lighten the burden of tax
payment.
The NTA has designated the clampdown on tax
delinquency as a top-priority issue since 1999. The
entire NTA is working to prevent tax delinquency andto place priority on the collection of delinquent consumption tax which is a type of deposit received andthe resolution of large-scale and unscrupulous tax
delinquency. The NTA also utilizes the Tax Payment
Call Center to handle delinquency cases. The agency isthus endeavoring to efficiently resolve tax delinquency.
As a result, the amount of tax delinquency as of the endof each fiscal year has declined for six consecutive
years since fiscal 1999.
Moreover, the NTA requests law enforcement
authorities to charge particularly unscrupulous taxpayers who conceal or dispose of assets with the intent toevade the procedure for collection of delinquent tax,
based on the penal provisions for evading delinquency
disposition stated in Article 187 of the National Tax
Collection Law.

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 26● Trends in Tax Delinquency(¥ Billion)
3,000

2,000
1,867

Self-Assessment System

899

1,000

1,055

0
’89

’90

’91

’92

’93

’94

’95

’96

’97

’98

’99

’00

’01

’02

’03
’04
(Fiscal year)■ Newly Occurring Tax Delinquency ■ Handled Tax Delinquency ● Amount of Delinquency(3) Tax Payment Call Centers
At Tax Payment Call Centers, tax officials makedemand notifications to delinquent taxpayers by telephone while referring to taxpayer information thatappears on a computer screen. The calls are placed
automatically by a state-of-the-art computer system thatsimultaneously displays the data for the delinquent taxpayer called. Out of 288,000 cases subject to demand
notification in fiscal 2004, 178,000 cases (around 62%)
were concluded. Office of Tax Payment Call Center iscontributing to improvement in the efficiency of handling tax delinquency.

Office of Tax Payment Call Center(4) Efficient Management of Tax Claims andLiabilities
The NTA manages national tax claims and liabilities
by processing tax returns, some of which require tax
payment and others that require tax refund. In 1966, we
initiated efforts to introduce a computer system to properly and efficiently manage these claims and liabilities.
In 2001, the KSK System was introduced at Tax
Offices nationwide, and tax claims and liabilities aremanaged via this integrated system.
Every year, about 40 million tax payments are made,mainly of income tax. To date, the majority of them
have been paid at financial institutions. To efficiently
process such a large number of payments, the NTA has
streamlined administrative operations by introducing
payment by account transfer through the exchange ofmagnetic tape for self-assessed income tax— so-called
tax payment by transfer account. *1 We have also

streamlined operations through cooperation with financial institutions and the Bank of Japan, including OCR
processing*2 of tax payment slips by the Bank of Japan.
Transfer procedures to pay refunds used to be performed through written documents from Tax Offices,
but the NTA developed paperless procedures for refund
transfers by magnetic tape in 2001 and intends to adopt
online transfer procedures from around the fall of 2006.
In these ways, we endeavor to achieve efficient andspeedy processing of payments.
The management of national tax claims and liabilities is the cornerstone of taxation and tax collection.
We will continue to strive to improve services by conducting procedures speedily and accurately through theadvanced application of the system and delivering
refunds to taxpayers as quickly as possible.

*1 Tax payment by transfer account is the method of tax payment whereby the Tax Office sends a tax payment slip to a financial institution designated in advanceby the taxpayer and debits the amount of tax payment from his or her bank account. If it is necessary to send tax payment slips to financial institutions in large
quantities, in order to perform the work of account transfer efficiently, the Tax Office sends a magnetic tape containing data for an account transfer to the financial institution, which processes the data brought, and after recording them on the magnetic tape, returns it to the Tax Office.
*2 OCR (Optical Character Reader) processing converts characters printed on tax payment slips into electronic data, thereby enabling paperless operations.

26

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 27

6Roles of CPTAs

Certified Public Tax Accountants (CPTAs) have a public mission as tax experts to strive to promote
taxpayer trust in line with the principle of the self-assessment system and realize tax compliance as provided in tax law, based on their independent and fair standpoint (Article 1, CPTA Law).
In this respect, CPTAs’ services - (1) tax proxy, (2) preparation of tax documents, and (3) tax counseling - must not be provided by other people than CPTAs, even free of charge (Article 52, CPTA Law)
to be provided only by CPTAs.
For the proper and smooth operation of the self-assessment system amid a substantial increase in thenumber of tax return filers, CPTAs are required and expected to play an important role in the proper
performance of tax obligations by taxpayers.
To this end, the NTA is making efforts to make CPTAs understand the tax laws correctly and toensure proper management of operations through consultation with tax accountants’ associations andthe Japan Federation of CPTAs’ Associations. The NTA deeply respects CPTAs who are fulfilling apublic mission, while it is considering dealing strictly with those who are in violation of the CPTA Law.

(1) Promoting Attachment of Return Working
Paper to Tax Returns
The CPTA Law was revised in May 2001 (effectivefrom April 1, 2002) to expand the system for hearing
the opinions of CPTAs and introduce a new system(Article 33-2, CPTA Law) was introduced in which
return working paper created by CPTA would be
attached to tax returns. The new system allows CPTAs
to attach to tax returns documents regarding calculation, audit, or counseling services that they provided forthe preparation of the tax returns. If the Tax Officeintends to conduct a tax examination on a taxpayer who
has filed a tax return along with such documents, the

CPTA possessing the certificate evidencing the authority of tax proxy must be given the opportunity to givehis or her opinions on the items written in the attacheddocuments before the taxpayer is notified about the tax
examination.
The NTA respects and endeavors to promote the new
system because the system contributes to the preparation and submission of accurate tax returns, the establishment of a reliable system for CPTAs, and thefacilitation of tax administration.

(2) Proper Guidance and Supervision for CPTAs
In order to ensure the reliability of people in the CPTA
system, the NTA is providing guidance and supervision
for CPTAs. In order to smoothly provide guidance andsupervision, the NTA has set up a consultative meeting
between the NTA and CPTAs’ associations, etc. The
NTA takes advantage of every opportunity available

including such as meetings to excite attention, and ismaking efforts to prevent the misconduct of CPTAs.
Furthermore, the NTA is making efforts to collect information on cases of misconduct, appropriately conducts
investigation under the CPTA Law and deals strictly with
CPTAs who are in breach of the CPTA Law.

Japan Federation of CPTAs’ Associations
The Japan Federation of CPTAs’ Associations is an organization that is required by the CPTA Law to beestablished to undertake guidance, liaison, and supervision services for CPTAs’ associations and theirmembers and perform the registration of CPTAs in order to contribute to CPTAs’ compliance with their
obligations and improvement of their services in view of their mission and duties. The federation consists of
15 tax accountants’ associations covering about 69,000 CPTAs and about 1,000 CPTA firms.
Each association of CPTAs provides a wide range of services including (1) training to contribute to theadvancement of members’ qualifications and the improvement and development of their operations, (2)social contribution by dispatching lecturers to tax education classes at elementary, junior and senior highschools, and (3) free-of-charge counseling services for small-scale taxpayers and the like.
For details, see the federation’s website at http://www.nichizeiren.or.jp (Japanese only).

27

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 28

7

Cooperation with Relevant Private Organizations

Blue return taxpayers’ associations
Blue return taxpayers’ associations are organizations formed chiefly by sole proprietorships filing blue returns, aiming at spreading the blue return system and promoting the submission of proper returns through honest bookkeeping.
At present, there are around 4,100 associations throughout the country, and the number of members of the associations is around 1.07 million. Each blue return taxpayers’ association performs wide-ranging activities, such as guidance on bookkeeping, holding seminars, spreading the blue return to persons other than the members of association,and so on. For further information, please inquire at your nearest local blue return taxpayers’ association.

Corporations associations
Corporations associations are organizations formed aiming at improving bookkeeping practices and deepening
and spreading the knowledge of tax. At present, there are 483 associations nationwide as incorporated companies,
and membership stands at about 1.12 million corporations. Each corporations association performs wide-ranging
activities, such as holding lectures and seminars on taxes or contributing to the sound development of business management and society. For further information, please access the website of the National General Federation of
Corporations Associations (http://www.zenkokuhojinkai.or.jp -- Japanese only).

Indirect tax associations
Indirect tax associations are organizations formed aiming at contributing to the dissemination of knowledge about
indirect taxes and realization of fair taxation and proper administration through the self-assessment system. At present, there are 560 associations nationwide, and membership stands at about 102,000 persons. Indirect tax associations make proposals to the government on ways to enhance the indirect tax system and its enforcement, and are
spreading knowledge about consumption tax and preventing tax delinquency. For further information, please accessthe website of the National Federation of Indirect Tax Associations (http://www.kanzeikai.jp -- Japanese only).

Tax payment associations
Tax payment associations are organizations formed under the jurisdiction of the Tax Offices of the Osaka Regional
Taxation Bureau aiming at disseminating knowledge about taxes, promoting proper tax filing and payment andenhancing compliance. At present, there are 83 tax payment associations under the control of the Federation of Tax
Payment Associations, and membership stands at about 290,000, bringing individuals and corporations together.
Each tax payment association is performing activities similar to those of both the blue return taxpayers’ associations
and corporations associations such as publicity activities for spreading knowledge about taxes and holding various
briefings. For further information, please access the website of the Tax Payment Associations (http://www.
nouzeikyokai.or.jp -- Japanese only).

Savings-for-tax associations
Savings-for-tax associations are organizations formed by taxpayers aiming at continuing to complete payment oftax within the due date through saving for tax payment. The saving-for-tax associations are established under the
Saving-for-Tax Association Law and at present, there are 78,000 associations. The saving-for-tax associations arepromoting the utilization of tax payment by transfer account and completion of tax payment within the due date, andare performing wide-ranging activities such as holding seminars on the tax law and soliciting “Compositions on Tax”
from junior high school students. For further information, please access the website of the National Federation of
Saving-for-Tax Associations (http://www.zennoren.jp -- Japanese only).

28

Self-Assessment System

The NTA is making efforts not only to provide information on taxes directly to taxpayers but also toconvey information on taxes to taxpayers gaining cooperation from relevant private organizations suchas blue return taxpayers’ associations and corporations associations. These relevant private organizations are playing a great role in realizing proper self-assessment system and in disseminating knowledge
about taxes as a faithful association of taxpayers.
These relevant private organizations are attempting to enhance coordination and cooperation
between organizations regarding the revised consumption tax, diffusing e-Tax and promoting the joint
holding of various events for the “Think about Tax” week campaign.

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 29

III Tax Administration in the Era of Globalization
The NTA promotes tax administration including cooperation
with foreign tax authorities to meet the era of globalization.
As multinational enterprises and the like conduct various cross-border economic activities withgrowing economic and social globalization, one country’s taxation system and tax administration
can have a great impact on other nations’ taxation systems and enforcement. The environment surrounding tax administration has thus changed dramatically. The elimination of international tax
avoidance and double taxation risks emerging from such environmental change has become amajor issue for tax authorities in all nations. In this respect, bilateral and multilateral talks on tax
issues have increased for the development of common rules on international transactions and forthe cooperation and sharing of experiences between tax authorities.
Under this situation, the NTA actively respond to the globalization of tax administration enhancing mutual trust and cooperation with other countries.
Furthermore, in order to tackle the problems of international tax evasion, the NTA has
enhanced and strengthened the organizations by various actions such as setting up specialized
units dealing with international taxation problems.

1

Developing Common Tax Rules

Today the number of international transactions is increasing and transaction formats are diversifying with IT and other developments. Taxation rules, however, sometimes differ from one country toanother. For example, if tax administration fails to eliminate the double taxation risk, it may block theflow of transactions and in turn make it difficult to maintain the tax compliance of taxpayers engaged in
global transactions.
Accordingly, the NTA is actively participating in discussion over tax problems related to cross-border transactions and setting common taxation rules in collaboration with foreign tax authorities.
● Developing Common Tax Rules(1) Review of the Model Tax Convention
In order to promote international investment and to prevent double taxation, the OECD (Organization for
Economic Cooperation and Development) Committee on Fiscal Affairs (CFA), which has established the ModelTax Convention as the basis for tax conventions with the release of its Interpretations and develops the rules on
emerging international taxation issues, has reviewed them periodically in keeping with the development of the
global economy.
(2) Setting taxation rules applicable to branches of foreign corporations
Opinions on attributing profits to the branches of foreign corporations (permanent establishment; PE) are diverse
among tax authorities, and there exists the potential risk of double taxation or taxation loopholes. The OECD CFA
works to establish a consensus view over the extent to which the OECD Transfer Pricing Guidelines, which areapplicable to transactions between associated enterprises that are legally separate enterprises, can by analogy be
applied to internal dealings between head offices and permanent establishments (PEs), as if they were separate
enterprises for tax purposes.
(3) Improving the process for resolving international tax disputes
As global trade and investment increase, the possibility of cross-border tax disputes necessarily increases as well.
Left unresolved, these disputes can result in double taxation and corresponding impediment to the free flow ofgoods and services in a global economy. Accordingly, in order to improve the process for resolving international29

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 30

tax disputes under tax conventions, the OECD CFA examines ways of improving the effectiveness of the Mutual
Agreement Procedure and the supplementary dispute resolution mechanisms. In March 2006, representatives fromthe private sector and the tax authorities assembled in one hall and held a consultation in Tokyo.
(4) Elimination of harmful tax competition
To attract foreign capital, some countries implement excessive tax reductions (tax incentives) on their financial
and services industries. Comparatively heavy taxation on labor, assets, and consumption in other nations’ results.
This has a negative influence on the fiscal base of the other nations and also gives rise to distortions in corporate
investment behavior. The OECD CFA endeavors to rectify this problem by issuing a list of countries and jurisdictions that offer extreme tax reductions.

Discussions on Development of Common Taxation Rules and Tax Enforcement
Problems - Participation in International Meetings between Tax Authorities
In order to promote cooperation and share experience among tax authorities regarding common issues,
such as international taxation problems, bilateral and multilateral conferences are held with the tax authorities of foreign countries with which Japan has close economic relations, as mentioned below. After holding
its 27th meeting in October 2005 as its last meeting, the Pacific Associations of Tax Administration (PATA)
was disbanded and was integrated into a new forum which, after extending the scope of countries, wasagreed to be organized as a new Commissioner-level meeting of ten tax administrations.
(1) Study Group on Asian Tax Administration and Research (SGATAR)The SGATAR was established in 1971, aiming to promote international cooperation among tax authorities in the Asia-Pacific region and the exchange of views and opinions concerning tax issues common toeach state. At present, SGATAR is composed of 13 members.
In accordance with the proposals of Japan, the common form of members’ basic information concerning the tax administration of each member was set down, targeting the sharing of basic information among
members’ countries and the broad provision of information to non-member countries. In November 2005,
the 35th meeting was held in Singapore.
(2) Japan-People’s Republic of China Tax Administrators’ Meeting and Japan-Korea Tax
Administrators’ Meeting
The NTA Commissioner promotes mutual understanding on each tax administration and enhances
mutual cooperation by holding bilateral meetings respectively with the Commissioner of tax authority of thePeople’s Republic of China and with the same of the Republic of Korea, and exchanges information on
their respective matters of concern related to tax administration. Speaking about recent meetings, in May
2006, the Japan-Korea Commissioners’ Meeting was held in Seoul.
(3) OECD Committee on Fiscal Affairs (CFA)The OECD CFA contributes to setting standards in the international tax world: the OECD Model Tax
Convention and the OECD’s 1995 Transfer Pricing Guidelines, and provides a forum for exchanging viewson tax policy and administrative issues. The OECD CFA work is conducted by groups of experts drawn
from member countries, and the NTA has positively participated in those activities. Furthermore, the OECD
CFA established the Forum on Tax Administration where tax administrators share information and experience and identify effective strategies/measures over various areas of tax administration.

30

Tax Administrationin the Era of Globalization(5) Sharing information and experience with the foreign tax authorities concerning tax administration
In order to resolve administrative issues by sharing information and experience concerning taxpayer services andtax compliance, the OECD CFA works on various issues, such as the promotion of electronic services, including
electronic filing and electronic tax payment, the measurement and evaluation of compliance, and the use of IT in
taxpayer audit functions. In addition, the NTA works on effective strategies/measures together with the foreign tax
authorities under a bilateral or multilateral regulatory framework.

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 31

2

Addressing Procedures under Tax Conventions

Where an enterprise is conducting cross-border transactions, double taxation would be likely toarise, due to the difference in taxation between countries. In order to prevent such double taxation, tax
conventions are concluded between many countries. The NTA is making the best use of the Mutual
Agreement Procedure based on such tax conventions to address smoothly the taxation problems including prevention of international double taxation. Furthermore, from the viewpoint of preventing tax evasion involved in cross-border transactions, the NTA positively utilizes tax conventions to engage inactivities such as information exchange with the tax authorities of the contracting countries.

(1) Preventing International Double Taxation —Implementation of Mutual Consultations Based on Tax Conventions
In the case where the interpretation about to whichcountry the income earned from cross-border transactions should be attributed varies from country to country, the double taxation risk on an enterprise throughthe transfer pricing taxation would rise. Such double
taxation is resolved through Mutual Agreement
Procedures between the tax authorities based on tax
conventions.
Regarding transfer pricing taxation, in order toensure predictability by taxpayers and execute thetransfer pricing taxation* properly and smoothly, the
NTA introduced the Advance Pricing Arrangement
whereby the NTA receives an enterprise’s request
regarding the methodology of calculating the arm’s

length prices and gives its confirmation. Recently, thenumber of cases involved in the bilateral advance pricing arrangement (BAPA) accompanied by the Mutual
Agreement Procedure, has been increasing. The number of countries having arranged BAPA is also increasing, and the cases of arranging BAPA with countries
with little experience in BAPA are increasing. In particular, the number of cases with countries in the Asian
region, including the People’s Republic of China, isexpected to increase.
To properly and quickly resolve cases for such consultations, the NTA endeavors to further deepen cooperative relations with foreign tax authorities andimprove the efficiency of such consultations.

● Japan’s Tax Convention Network (45 conventions applied in 56 countries, as of May 2006)
Europe (15)

Eastern Europe / the former Soviet Union (17)Austria, Belgium, Denmark, Finland, France,
Germany, Ireland, Italy, Luxembourg, Netherlands,
Norway, Spain, Sweden, Switzerland, U.K.

Armenia1, Azerbaijan1, Belarus1, Bulgaria, Czech Republic2,
Georgia1, Hungary, Kyrgyz1, Moldova1, Poland, Romania, Russia1,
Slovakia2, Tajikistan1, Turkmenistan1, Ukraine1, Uzbekistan1

North America (2)Canada, U.S.A.

East and Southeast Asia (8)China3, Indonesia, Malaysia, Philippines,
Republic of Korea, Singapore, Thailand,
VietnamMiddle andNear East (3)Egypt, Israel, Turkey

South Asia (4)Oceania (3)Bangladesh, India,
Pakistan, Sri Lanka

Australia, Fiji4, New ZealandCentral andSouth America (2)Brazil, Mexico

Africa (2)South Africa, Zambia

Note: 1 The convention with the former Soviet Unions is succeeded.
2 The convention with the former Czech-Slovak Republic is succeeded.
3 The convention is not applicable to Hong Kong and Macao.
4 The former convention with the United Kingdom is succeeded andapplicable to the Republic of Fiji.

* If an enterprise sets prices for transaction (transfer pricing) with the overseas affiliated company at an amount different from the normal price, it becomes possible to transfer profits from the parent company to the affiliated company, and vice versa. The transfer pricing taxation means the system of imposing a tax after
resetting the transfer price to the normal price for transaction (this is called “the arm’s length price”) to prevent income from being transferred overseas throughsuch transactions with the overseas affiliated company.

31

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 32

Number of Mutual Agreement Procedure Cases by TypeEnd of June 2000

End of June 2005

(Number, %)(Number, %)Transfer
Pricing
Taxation

Others29
14.4%

Others

30
23.1%

29
14.4%

Transfer
Pricing
Taxation

Total:
130

48
36.9%

APA

52
40.0%

Total:201

APA(2) Exchange of Information Based on Tax
Conventions
As the double taxation risk in international transactions heightens, taxation loopholes where income is not
taxed in any country arise through tax avoidance
schemes that abuse tax convention privileges. To prevent this kind of international tax avoidance and tosecure their taxation rights, countries are strengthening
their measures regarding international taxation. As economic activities grow more global, it is crucial that
information outside the country can be gathered toensure appropriate taxation. Accordingly, each country’s tax authority is pouring their energies into
exchanging the information necessary under tax conventions.
In order to cooperate willingly in such international
information exchange, in fiscal 2003, the NTA was
newly given the authority to make inquiry and inspection and subsequently, in fiscal 2006, the procedure forcollecting information was set down for the purpose of3

dealing with requests for information exchange relatingto criminal investigations of other contracting countries. Furthermore, in July 2005, a team specialized in
information exchange was newly organized in theInternational Operations Division of the NTA. So theframework of dealing quickly with requests from othercontracting countries and positively requesting thecooperation of other contracting countries from the
NTA is being improved accordingly. As regards thepromotion of information exchange, it is important thatthe tax authorities of the contracting countries cooperate. From this viewpoint, in addition to participating inmeetings involving the persons in charge of information exchange under the control of the OECD
Committee on Fiscal Affairs (CFA), the NTA will positively become involved in technical cooperation to thedeveloping countries.

Addressing International Tax AvoidanceConcerning tax evasion and tax avoidance by taking advantage of cross-border transactions, the
NTA is carrying out proper taxation after properly grasping the facts through examinations. To thisend, the NTA has enhanced the examination framework, such as increasing the number of Senior
Examiners (International Taxation), setting up a project team and so forth, and is endeavoring to collect information helpful to taxation through every opportunity available, such as making the best use of
information exchange under the tax convention and grasping the flow of funds to foreign countries.
Furthermore, the NTA is dealing properly with the transfer pricing issues involved in the prices fortransaction with related companies located overseas, based on information collected by examinations.

32

Tax Administrationin the Era of Globalization

143
71.1%

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 33(1) International Tax Avoidance Schemes
As cross-border business activities expand, international tax avoidance of reducing tax liability by cleverly taking advantage of differences between national tax
systems and the tax conventions is developing into amajor international issue. Finance specialists, legal
counsels and Certified Public Tax Accountants become
involved in international tax avoidance, and various
entities such as sleeping partnership (Tokumei Kumiai)
contracts, partnerships*1, LLC*2 and similar or complicated schemes making free use of new financial technology are used for international tax avoidance.
From the viewpoint of realizing proper and fair taxation, the NTA is endeavoring to grasp the actual stateof such tax avoidance schemes through every opportunity available. If it is recognized that there are problems
for taxation purposes, the NTA conducts close examinations and is dealing strictly with tax evaders so thatno amount of tax avoided by the tax avoidance scheme
is finally borne by conscientious taxpayers.
To this end, the NTA has increased the number ofSenior Examiners (International Taxation) and has

endeavored to enhance and strengthen the examination
framework, such as setting up the International
Examination Division in key Regional Taxation
Bureaus. In recent years, the international taxation
problems have begun to extend from large enterprises
to small and medium-sized enterprises and wealthy
individuals. In order to deal with such circumstances,
the NTA established the “Project Team to Deal with
Internationalization” in the Taxation Department of the
key Regional Taxation Bureaus and is endeavoring tograsp or elucidate such tax avoidance schemes and collect information on financial assets held overseas by tax
evaders.
The National Tax College provides training courses
on international tax law, tax conventions, derivatives*3and foreign languages over a long period.
The NTA has requested the departments and bureaus
in charge of the tax system to reform the relevant system in order to cope with tax avoidance schemes thatcannot be properly handled under current tax laws.

(2) Transfer Pricing Issues
With the globalization of corporate activities, transfer pricing issues have become important in the field ofinternational taxation. For example, if a Japanese parent
company sets a low price when it exports products to
its overseas subsidiary, income is transferred overseas.
The transfer pricing tax system has been developed toaddress such issues.
Transfer pricing examinations generally require alarge volume of documents and considerable time tocalculate the appropriate price. If we consider the costs
required to resolve double taxation that arises fromtransfer pricing taxation, this issue has a tremendous
influence on corporations.
In recent developments regarding transfer pricing

issues, Japanese companies have increasingly transferred their production bases overseas and provided
their overseas manufacturing subsidiaries with suchintangible assets as production technology and knowhow, as well as management guidance, operations management, and other services. This means that Japaneseparent must receive fair prices for intangible assets provided to overseas manufacturing subsidiaries.
As the importance of transactions regarding intangible assets and rendering of service is rising, the NTA
clarifies*4 how these transactions should be handled forthe purpose of the transfer pricing taxation and endeavors to accumulate know-how for smooth tax enforcement of the transfer pricing taxation.

*1 A partnership is an organization of two or more persons who carry on a business as co-owners for profit. Partnerships are widely used to set up joint ventures
mainly in the U.S. There are generally two types of partnerships: (1) general partnerships, which consist of two or more general partners with unlimited liability,and (2) limited partnerships, which consist of one or more general partners who manage the business and have unlimited liability and one or more limited partners who do not participate in management and have limited liability.
*2 A limited liability company (LLC) is a business entity organized based on the limited liability company law in the U.S. state where the company is located. LLCs
consist exclusively of members who have limited liability.
*3 Derivatives are new financial products based on bond, stock, exchange, and interest rate transactions. Futures, options, and swaps are types of derivatives.
*4 In order to clarify how the intangible asset transactions and the agreement on sharing expenses should be handled, the NTA revised the administrative guidelines for operation concerning transfer pricing in March 2006.

33

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4Technical Cooperation to Developing Countries

The NTA is positively engaging in activities
involving technical cooperation to developing
countries. Recently, in addition to theInternational Seminar on Taxation (ISTAX), theNTA carries out nation-by-nation training programs under the projects of the Japan
International Cooperation Agency (JICA).
Particularly, in the fields of improvement in compliance, enhancement of taxpayer services, thedevelopment of human resources, dealing withinternational taxation and so forth, the NTA is
actively conducting activities such as dispatchingexperts to ASEAN countries and others, andinviting tax officials from foreign tax authorities
to Japan to provide training. Furthermore, the
NTA is positively cooperating in technical cooperation such as seminars, which are provided orheld by the OECD, the Asian Development Bank
(ADB) and so forth.
Tax Administrationin the Era of Globalization

Outline of Technical Cooperation
1 Dispatching Experts(1) Dispatching Experts for Long-Term Stationing
To introduce the NTA’s operations and experiences and implement intellectual support, including theprovision of advices on the improvement of tax administration in developing countries, NTA officials are dispatched as long-term experts of the Japan International Cooperation Agency (JICA) for stationing at the tax
authorities of developing countries. Such experts have been dispatched to Indonesia since 1996, to
Malaysia since 2002, and to the Philippines and Vietnam since 2005.
(2) Dispatching Experts for Short-Term Stationing
At the request of tax authorities in developing countries, the NTA dispatches officials for short-term stationing to lead the improvement of tax administration and the like. In the current fiscal year, the NTA dispatched such experts to Vietnam, China, Cambodia, Malaysia, Laos, etc.

2 Implementing Training Programs in Japan(1) International Seminar on Taxation (ISTAX)
As part of JICA group training programs subject to Official Development Assistance (ODA), the NTA
implements International Seminar on Taxation (ISTAX) for tax officials from Asia, Africa, Latin America, theMiddle East, Oceania and Eastern Europe. The seminar include the general course (established in 1968,
training period: lasting around two and half months) and the senior course (established in 1974, training
period: lasting around one month) to cover lectures, discussions, study tours, etc.
The ISTAX aims at transferring the expertise and know-how regarding Japan’s tax system and tax administration to developing countries for the improvement of their tax systems and tax administration and nurturing
people’s understanding of Japan’s tax administration in these countries so as to promote mutual friendship.
(2)Short-Term Seminar for Foreign Tax Officials (Tax Administration Seminar)
In response to the request of foreign tax authorities, the NTA, in cooperation with JICA and other agencies, implements short-term seminars (training period: lasting around one or two weeks) to introduce
Japan’s tax administration and tax system to tax officials from Vietnam, Mongolia, the Philippines,
Indonesia, Malaysia, etc., held on a nation-by-nation basis.
(3) NTA Practical Training Course
The NTA implements practical training courses at the National Tax College mainly for tax officials fromdeveloping countries who are enrolled in master’s courses at graduate schools of Keio University,
Yokohama National University, the National Graduate Institute for Policy Studies, and Hitotsubashi
University, under World Bank and other scholarships. These training courses have been open since April
1996 to help these officials learn knowledge and skills regarding public finances, taxes, tax administrationand the like and to contribute to the improvement of tax administration in their countries.

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IV Remedy for Infringement of Taxpayer Rights
Requests for Reinvestigation, Requests for Reconsideration,and Litigation: Japan’s Systems to Address Infringement of
Taxpayer Rights and Interests
When a taxpayer disagrees with the Tax Office about a correction made during a tax examination and wants to appeal, there is an appellate system that allows for an administrative review
before instituting litigation directly with the court. This review system provides simple proceduresto promptly remedy infringement of taxpayer rights and interests and is composed of requests forreinvestigation and requests for reconsideration.
If the taxpayer is still dissatisfied after receiving the outcome of the request for reinvestigation,
he or she can submit a request for reconsideration to the Director-General of the National Tax
Tribunal, a specialized institute which is independent from the District Director of the Tax Office.
In addition, if a taxpayer wishes to appeal the disposal of his or her case after a decision has
been given by the Director-General of the National Tax Tribunal, the taxpayer may appeal to thecourt to seek remedies, as in other general administrative cases.

(1) Requests for Reinvestigation
Requests for reinvestigation represent the first stageof administrative dispute procedures regarding dispositions concerning national tax. To appeal a correction/
determination or seizure made by the District Directorof the Tax Office or other official, a taxpayer lodges arequest for reinvestigation with the District Director of
the Tax Office or other official to request the ruling be
revoked or changed.
In recent years, requesting reinvestigation has
become complicated due to the geographical expansion
and globalization of economic transactions and thenumber of cases in which it is difficult to grasp thefacts or interpret and apply the laws and regulations, isincreasing. To respond to this situation, the NTA has
established Rulings and Legal Affairs Division in each

Regional Taxation Bureau and assigned a Special
Officer (Legal Affairs) to them and is developing tax
officials that are familiar with such reviewing in addition to having the ability to examine and collect by providing various forms of training. Like this, the NTA is
endeavoring to build up an organization which is capable of dealing properly and quickly with requests forreinvestigation from taxpayers.
The NTA is endeavoring to process properly administrative works involved in such request for reinvestigation and to execute uniformly the tax administration
under the correct interpretation of the tax laws throughout the country so that proper and fair taxation and collection are realized for taxpayers at the stage of
examination or collection.

(2) Requests for Reconsideration
Taxpayers who wish to appeal the decision of theDistrict Director of the Tax Office in relation to theirrequest for reinvestigation can lodge a request forreconsideration with the Director-General of the
National Tax Tribunal.
The National Tax Tribunal is an impartial body,
independent from Regional Taxation Bureaus and Tax
Offices, and provides relief to infringement of taxpayer
rights and interests. Appeals judges, associate appeals
judges, and tax tribunal examiners with specialized
knowledge and vast experience examine and review thecase from a neutral standpoint.
For the posts of the Director-General of the National
Tax Tribunal as well as the Chief Appeals Judges ofTokyo and Osaka Regional Tax Tribunal, former justices
and former public prosecutors have been appointed.
35

The National Tax Tribunal promptly clarifies thepoints at issue in a case by drafting a chart outlining thepositions of each party after fully ascertaining their perspectives by contacting the party requesting reconsideration and the Tax Office. The Tribunal endeavors toquickly and speedily remedy any infringement of therights and interests of the taxpayer by listening fully tothe views and positions of each party and conducting
its own examination when necessary.
Decisions by the Director-General of the National
Tax Tribunal would not be more disadvantageous to thetaxpayer than the dispositions made by the District
Director of the Tax Office. Moreover, the District
Director of the Tax Office cannot institute litigationeven if he or she disagrees with the ruling, because theruling by the Director-General of the National Tax
Tribunal represents the final decision of the NTA.

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 36

Relationship between the Appellate System and Litigation

Taxpayer

Correction/
determination
delinquency
disposition, etc.

Request for reinvestigationmust be instituted within
2 months.

Request for reinvestigation

Decision onrequest forreinvestigation

District Director of Tax Office

Remedy for Infringementof Taxpayer Rights• No decision on request forreinvestigation after 3 months(Taxpayer is informed of right tofile request for reconsideration).

Request forreconsiderationmust be instituted
within 1 month.

Request for reconsideration

Decision onrequest forreconsideration

Director-General of
National Tax Tribunal• No decision on request forreconsideration after
3 months

Litigation must be
instituted within
6 months.

Litigation

Court

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国税庁2006̲E̲0802 2006.08.18 17:22 ページ 37(3) Litigation
If a taxpayer wishes to appeal the decision by the
Director-General of the National Tax Tribunal, he or
she is entitled to appeal to the court to seek remedy.

(4) Case Trends
The NTA endeavors to process every request forreinvestigation within three months. In recent years,
around 80% of these requests were processed in thisway. The number of requests for reinvestigation regarding taxation totaled 4,065 in fiscal 2005. In some
14.9% of the request cases, taxpayers’ claims weretotally or partially endorsed due to new findings. The
National Tax Tribunal endeavors to make a decision on
every request for reconsideration within one year. The
number of requests for reconsideration regarding taxation totaled 2,919 in fiscal 2005. In about 15.9% of therequest cases, taxpayers’ claims were totally or partiallyendorsed. As for litigation regarding taxation, 319 litigation cases were instituted in fiscal 2005. 469 litigation
cases were processed. In some 10.2% of the litigation
cases processed, taxpayers’ claims were totally or partially endorsed.
To gain taxpayer understanding regarding the system
for remedy of infringement of taxpayer rights, the NTA
and the National Tax Tribunal provide information in
Japanese on case decisions via the website.

● Percentage of Reinvestigation Request Cases
Processed within Three Months and Number of
Reinvestigation Request Cases Processed● Percentage of Reconsideration Request
Cases Processed within a Year and Number ofReconsideration Request Cases Processed

6,000

5,000

4,800

100

79.6

84.7

87.8

86.1

89.7

100

91.0
80

82.2

80

65.5

4,065
60

3,600

5,265

4,713

4,379

5,198

3,000

40

1,200

0
FY2002

FY2003

FY2004■ Number of Tax Cases Processed ● Percentage of Cases Processed

56.9

3,032

3,206

2,919 60
40

2,000

2,782

FY2001

54.6
48.9

4,124

2,400

FY2000

84.5

4,000

FY2005

20

1,000

0

0

3,508

3,146
20

0
FY2000FY2001

FY2002

FY2003

FY2004

FY2005■ Number of Tax Cases Processed ● Percentage of Cases Processed

Response to Complaints from Taxpayers
Not only requests for appellate of an administrative disposition but also complaints, requests, criticisms
or consultation over problems, covering all aspects of tax administration, such as the attitude of the tax
official who responded to taxpayers or the method of examination, may be forwarded to the NTA. The NTA
endeavors to respond promptly and properly by taking the viewpoint of taxpayers because we believe that
responding forthrightly to taxpayer grievances is crucial to earn their understanding and trust. Moreover, inJuly 2001, the position of Taxpayer Support Officers was created, and the position’s duties include
explaining procedures for remedies of infringement in cases where the taxpayer’s rights or interests havebeen affected.

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V Administration of the Liquor Industry
Ensuring the Sound Development of the Liquor Industry

Liquor tax has been a major source of government revenue alongside land tax since the Meiji
Restoration of 1868. Liquor tax even surpassed land tax revenue at one point to become the primary source of national tax revenue. But subsequently income tax, corporation tax, and other direct
taxes have come to make up a greater proportion of total revenue. In fiscal 2004, liquor tax
amounted to ¥1.659 trillion and accounted for 3.6 percent of total tax revenue. Liquor tax is a stable form of tax revenue because it is not easily affected by fluctuations in the economy. For thisreason, liquor tax continues to play an important role in Japan’s tax system today.
The liquor industry is composed of 2,841 manufacturers and 163,658 distributors (as of the endof fiscal 2004), more than 95 percent of which are small or medium-sized enterprises.
Accompanied by a shrinking population, the public’s growing interest in health maintenanceand food safety, changes in lifestyles and progressive deregulation, there are significant changes inthe environment surrounding the liquor industry.
In order to deal with such socio-economic change, the NTA has positively exchanged opinionswith the liquor industry, restaurants, and consumers. Considering these, the NTA is taking various
measures for the sound development of the liquor industry and from a broad perspective, covering
the liquor industry as a whole.

(1) Measures for Improving the Managerial
Makeup of the Liquor Industry
NTA added provisions aiming to protect the
Geographical Indications (GIs) for Sake to the“Labeling Criteria concerning Geographical
Indications,” which had previously been applicable
only to wines and distilled liquor. In December 2005
the NTA designated “Hakusan” as the first place of origin of Sake GIs.
Furthermore, as overseas demand for Japaneseliquors has increased, due to growing interest inJapanese food, the NTA indirectly supports the expansion of Japanese liquor exports by providing information regarding export procedures and other relevant
information to the liquor business.
In addition to the above, the NTA has programs thatallow liquor businesses to identify their own management problems and provide information on businesssuccess cases.

(2) Support to Improvement in Management
In order to revitalize the management of small andmedium-sized liquor enterprises, the NTA is conducting measures to support liquor retailers, such as theexecution of management improvement plans, holding
workshops or individual consultation meetings, creating a low interest financing system for equipment
funds, setting up a website for consultations, designat-

ing model businesses and so forth. Furthermore, the
NTA is providing various supports for liquor manufacturers to draw up management reform plans and for
liquor wholesalers to reinforce their management basis
under the Law on Support for Business Innovation of
New Business Activity of Small and Medium-sizedEnterprises.
38

Administrationof the Liquor Industry

In order to improve the managerial makeup of theliquor industry, it is necessary for all bodies concernedwith the whole liquor industry, ranging from liquor
manufacturers through to liquor distributors and liquor
retailers, including restaurants, consumers, and government to work together, based on the viewpoint of consumers, in ensuring production of liquor with quality
and safety, appropriate quality control in the distribution stage, and the supply of products with proper information.
In this respect, the NTA actively listens to the opinion of consumers, provides information to the liquor
industry and conducts label, quality and safety checks
on liquors in the retail stage.
In order to support the activities of the liquor industry to provide proper product information and to establish regional brands of “Sake”, in October 2005, the国税庁2006̲E̲0802 2006.08.18 17:22 ページ 39(3) Ensuring a Fair Trade Environment
For the sound development of the liquor industry, it
is important to ensure a fair trade environment. To thisend, the NTA is promoting public relations activities
under the “NTA Guidelines for the Sound Developmentof the Liquor Industry through Fair Competition (theGuidelines)” in which the fair rules on trading of liquors
are shown by the NTA *1, and is giving guidance toenterprises which are recognized as not trading in compliance with the fair rules shown in the Guidelines as aresult of the trading fact finding survey.

Under such circumstances, the liquor industry is also
voluntarily promoting fair trading, such as reasonablepricing by the cost plus method, or establishing objective criteria related to the trading terms.
The NTA will make the liquor industry fully awareof the Guidelines, will conduct more closely the trading
fact finding survey, and will endeavor to ensure a fairtrade environment in cooperation with the Fair Trade
Commission of Japan (JFTC).

(4) Cooperation with the National ResearchInstitute of Brewing (NRIB)
Office of Analysis and Brewing Technology at each
Regional Taxation Bureau conducts technical guidance
for liquor manufacturers and safety checks on liquors.
In addressing brewing technologies for improving
liquor quality, and ensuring safety of liquors, researchand development of analytical methods and other highly technical problems that the NTA alone cannot
address, the NTA exchanges information and cooperates with the NRIB*2 for the sound development of theliquor industry.

National Research Institute of Brewing
The National Research Institute of Brewing (NRIB) was established at Takinogawa, Tokyo in 1904, as anational research organization of technology for alcoholic beverages within the Ministry of Finance. The
NTA brewing research institute was transformed into an independent administrative agency in April 2001.
Furthermore, in April 2006, the NRIB became an independent administrative agency, in which the staff aretreated as non-governmental employees, based on the perspective of promoting cooperation with the
public sectors and universities such as personnel exchange. As Japan’s only comprehensive research
institute regarding liquors, the institute undertakes advanced analyses and examinations for proper and fairtaxation on liquors, research and surveys on liquors, training programs for small and medium-sized liquor
manufacturers, seminars for consumers, etc. For details, see the NRIB website at http://www.nrib.go.jp.

(5) Responding to Social Demands
In order to meet social demands, such as preventing
underage drinking, in 2003, the NTA attempted toensure thorough compliance with the obligations,which was introduced by revision of the “Law concerning Liquor Business Associations and Measures for
Securing Revenue from the Liquor Tax” in 2003, toappoint a liquor sales manager, to attend sales management training, and to present at venues displaying
liquor beverages. Furthermore, in order to review
whether the liquor sales management system is properly established, in September 2005, the NTA added“Matters concerning Liquor Sales Management” to thecontent that should be stated in applications for liquor

sales licenses. In addition, the NTA revised labelingstandards at venues displaying liquor to labeling that ismuch more persuasive and effective and that can limit
access to liquor by underage people. This led to areform of the label stating “Underage Drinking is prohibited by Law” to one stating “Where unable to confirm that the purchasers are more than 20 years old, theliquor retailers shall not sell liquor to them” inSeptember 2005 to prevent minors from gaining accessto liquor.
In accordance with the resolution of the general
meeting of the World Health Organization *3 held in
May 2005, the NTA is considering, with the relevant*1 The Guidelines prescribe fair rules on “reasonable pricing,” “fairly handling trading partners,” “setting the terms of fair trade,” “transparent and reasonablerebate,” and so on.
*2 The NRIB is Japan’s only independent administrative institution engaged in activities regarding liquors. It conducts research on liquors, liquor quality evaluation,
provision of liquor information, liquor seminars, etc.
*3 This World Health Assembly is the supreme decision-making body for the World Health Organization (WHO).

39

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 40

government offices and the liquor industry, measures
for reducing the impact imposed on the health of people or society caused by the harmful use of alcohol.
The efforts not only of the liquor industry but also offamilies, schools, communities, and the government are

crucial to successfully address this issue. The NTA is
cooperating and coordinating its efforts with the related
government ministries and agencies, members of theliquor industry, and others.

● Recent 10-year Trends in the Taxable Amount of Liquors by Classification(Total of domestically-produced and imported liquors)■ Beer ■ Miscellaneous liquors■ All kinds of liquors(Thousand kl)■ Sake ■ Shochu(Thousand kl)
2,000

12,0001,800
10,000
1,600

1,400
8,000
1,200

1,000

6,000

800
4,000
600

400
2,000
200

0

FY1996

FY1997

FY1998FY1999FY2000FY2001

FY2002

FY2003Administrationof the Liquor Industry

0

FY1995

FY2004(6) Partial Review of Liquor Licenses
A licensing system is adopted in the liquor industry to ensure the proper collection of liquor tax and smoothtransfer of the tax burden to consumers. Recently, the NTA partially reviewed the license requirements to improve
consumer convenience.
(i) The manufacturing license for single distillate Shochu
In recent years, demand for Shochu (Japanese distilled liquors) has increased overall. Consequently, the liquor
manufacturer’s desire for a new manufacturing license, especially for single distillate Shochu manufactured using
local specialties such as rice, barley, sweet potato and buckwheat as the main raw materials, is increasing.
Complying with such requests, in January 2006 the NTA began the issuance of licenses providing the prescribed
requirements were met.
(ii) The liquor retail license
The liquor retail license was classified into three categories - the general liquor retail license, the large-scaleliquor retail license and the wide-ranging special liquor retail license. In March 2006, in line with the “Three-year
Program for Promoting Regulatory Reform and Privatization” (decided by the Cabinet in March 2004), the NTA
integrated them into the general liquor retailer license to simplify or rationalize the liquor sales licenses.

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国税庁2006̲E̲0802 2006.08.18 17:22 ページ 41

Current Situation and Forecasts of the Liquor Industry
Change in Social and Economic Situation in Japan

Current Situation

Manufacturers

Changes in Social Situation● Problems with securing quality levels● Structural and business management problems- Weak and hard-to-manage business structure

Growing interest in health and safety▼▼▼- An increase in low-cost, low-priced liquors

Age of shrinking population- Excessive supply- Excessive competition

Changes in lifestyles▲

Changes in diet▼
Wholesalers● Declining profit margins (changes in profit structures)▼▼▼● Declining functionality▲
Retailers● Growth of organized retailers

Changes in Economic Situation● Participation of inexperienced retailers

Progress in deregulation▼▼▼● Decline of general liquor shops

Deflation and slack wage growth

Restaurants● Inappropriate management of liquor

▼
▼
▼

▲

Globalization● Lack of product information▲● Doubts about quality and prices

41

▼
▼
▼

Consumers

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 42

Efforts by Government and Industry

Vision
Shifting priority from quantity to quality
Consumer’s viewpoints

Manufacturers● Measures to secure and improve quality levels

Manufacturers- Utilization of Geographical Indications to establish regional brands- Studying descriptive labels to provide proper information to
consumers

▼

▼
▼
▼

- Studying measures to increase value added● Measures to address structural and business management problems

Manufacturing high-quality liquorwith higher value added
Appropriate management strategies- Supporting adjustment of overcapacity and improved efficiency inthe industry- Giving guidance on self-diagnosis and analysis of management- Promoting exports

Wholesalers● Guidance covering manufacturing, wholesale, and retail layers▼▼▼- Promoting fair transactions▼

Manufacturers/Wholesalers/Retailers- Enhancing after-the-fact checks on liquors on the market

Securing appropriate profit margins
through utilization of wholesale functions and developing relevant markets- Training by experts- Holding meetings for exchange of views

Wholesalers/Retailers● Measures to solve problems with distributors

Retailers▼▼▼- Expanding and promoting utilization of management support
measures

Administrationof the Liquor Industry- Improving quality control, services, etc.

▼

- Preventing abuse of the dominant bargaining position of largescale retailers by publicizing notification of prohibited activities.

Discrimination through provision ofdiversified services
Sales control meeting social demands- Responding appropriately to social demands(Strict liquor sales management, revision of the labeling standards
for confirming a purchaser’s age upon selling, removal of liquor
vending machines and promotion of tackling problems involving
liquor and public health)

Restaurants● Measures taken from consumers’ viewpoints- Information and education activities regarding proposals on ways
to drink liquor safely and pleasantly

▼

▼
▼
▼

Restaurants/Consumers

Providing safe, delicious liquor
Providing appropriate productinformation
Information regarding ways todrink liquor pleasantly- Finding facts regarding quality control at restaurants and bars
- Liquor quality checks and labeling based on consumers’ viewpoint

Consumers- Holding liquor-tasting events

Correct knowledge about liquor

▼

▼
▼
▼

- Establishment of counseling counters for consumers

Consciousness about cultural
aspects of liquor42国税庁2006̲E̲0802 2006.08.18 17:22 ページ 43

VI Future Challenges

Changes in Environment Surrounding Tax Administration
At present, our nation is facing an unprecedented situation of declining birthrate and aging of
the population. The saving rate is significantly declining and the working-age population is anticipated to reduce. The so-called “days of a continuously growing economy” are over. In such circumstance, the people’s desire for administrative and fiscal structural reform is getting stronger. In
order to deal with such structural change in society, the tax system is being reviewed.
Furthermore, the shapes of enterprises and family lifestyles are undergoing marked transformation, due to the diversification of employment and family structures. The rapid progress of IT andexpansion of cross-border activities of individuals and enterprises, along with the economic development of Asian countries and economic globalization are seen in economic activities. In addition,accounting standards penetrate internationally and mutually.
The environment surrounding the tax administration is markedly changing by the socio-economic movement as mentioned above. Due to tax system reform, such as a reduction in the tax
exemption sales threshold for enterprises for consumption tax and a review of pension taxation, thenumber of final returns has significantly increased. Accordingly, the administrative work of Tax
Offices involving the processing of such returns has also been increasing. Furthermore, tax avoidance methods are becoming increasingly shrewd, based on the progress of IT and globalization of
the economic society, meaning cases of tax examinations and collection are becoming ever more
complicated and difficult than before. As mentioned above, the environment surrounding the tax
administration is becoming more and more difficult in both quantitative and qualitative terms.

NTA’s Responses to Such Changes in Environment
In order to continuously fulfill the mandate of the people under these difficult circumstances, the
NTA should implement priority-oriented tax administration while allocating the limited resources
effectively and efficiently. We believe that we should make such efforts in order to secure sufficienttax examination and collection, maintain and improve taxpayers’ compliance with law and giveconsiderations to taxpayer services.
To this end, in line with the purport of the self-assessment system whereby after taxpayers calculate the amount of tax themselves, they make a voluntary declaration and voluntary payment, it isnecessary to restructure the system of providing taxpayer services. After restructuring, the NTA
reviews the computer systems and relevant operations regarding back-office operations of Tax
Offices, attempts to outsource administrative work which can be handled by persons other thanofficials of Tax Offices and are planning to positively promote the rationalization of and improvement in efficiency of administrative work. Furthermore, concerning the administrative work
involved in tax examination and collection also, and from the perspective of maintaining andimproving taxpayer compliance, the NTA is planning to refine the system by making positive useof IT to review operations involved in tax examination and collection and to attempt further
enhancement of the tax administration.

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Concrete Measures(1) Improving Tax Payment Environment
The NTA is endeavoring to improve taxpayer services so that taxpayers themselves are able to file thecorrect returns and make tax payment.
More specifically, the NTA is endeavoring to provide tax information required by taxpayers by enhancing the content of the information provided on the NTA
website. Furthermore, the NTA is endeavoring to diversify the means of tax return filing and tax payment bymaking the best use of IT such as the e-Tax and the“Filing Assistance on the NTA Website.” Furthermore,at present, the NTA is planning to improve the convenience of taxpayers such as shortening the waiting time
until getting an answer by handling intensively telephone consultation with which the Tax Counsel Offices
and Tax Offices have dealt individually, at theTelephone Consultation Center.

(2) Overhauling Back-office Operations inside
Tax Offices
While giving full consideration to the fact that the
NTA’s operations have a direct bearing on the rights
and obligations of taxpayers, the NTA is improving theefficiency of back office operations inside Tax Offices
by reforming duties through the growing use of IT.
Specifically speaking, the NTA is planning to
improve the efficiency of administrative work by handling the majority of back office operations at one

department in a unified manner, which is presently handled respectively by two or more departments within a
Tax Office (bureau-level integration of back office
operations). Furthermore, the NTA is promoting centralization of operations which are handled in each Tax
Office and the outsourcing of administrative work
which can be handled by persons other than officials of
Tax Offices.

(3) Overhauling Tax Examination and Collection
Under circumstances whereby internationalizationand highly-networked information are progressing in
the economic society, in order to ensure proper and fairtaxation, the NTA is responding to advanced areas,such as international tax avoidance schemes and electronic commerce, by developing a system to deal withenterprise groups engaged in such wide-area transactions, and is also overhauling tax examination and collection duties throughout its organization. Furthermore,
the NTA is planning to refine the system so as to beable to make flexible use of the various kinds of infor-

mation on taxpayers.
In view of CPTAs’ public mission to support the
self-assessment system, the NTA also endeavors tofacilitate the system for CPTAs to attach working
papers to tax returns under the CPTA Law. At the sametime, the NTA is improving responses to taxpayer
inquiries and the utilization of advance pricing arrangements regarding transfer pricing in order to increase thepredictability of tax matters for taxpayers’ economic
activities.

The NTA is developing a work environment where
its officials are encouraged to perform their duties withenthusiasm.
Particularly, in view of the fact that the number offemale officials of the NTA is increasing year by year,
based on the basic philosophy of the “Act for the
Promotion of Measures to Support the Fosterage of the

Next Generation,” as established in July 2003, the NTA
has devised an “Action Plan” to develop a work environment to promote a balance between childcare andwork, under which the NTA started activity on April 1,
2005. Furthermore, the NTA is planning to review thetraining system in tune with changes in the environment.

To promote the aforementioned measures, the NTA is endeavoring to attain the optimum allocation of the limited staff resources, budget distribution based on quantitative results and the placement of the right people in theright jobs.

44

Future Challenges(4) Improving NTA Officials’ Work Environment

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 45

Changes in Environment Surrounding Tax Administration

and N

Japan’s fast demographic structure changes = population-declining society, ultra ageing society
Contracting labor supply

Lower household saving ratio▼
End of steadily growing economy ➞ Requirement for further administrative reforms
Requirement for tax reforms = The tax system supported by all healthy people
Requirement for administrative reforms = Realizing a slim, efficient government

The above-mentioned environmental changes
accelerate the following changes further: Staffing difficulties

Increasing numbersof tax return filers

 Basic stanceTaxpayer services should be rebuilt in line with therising number of tax return filers and with the objectives of the self-assessment system.

(1) Promoting utilization of IT for information services
Expansion of the NTA website and the Tax Answer System,
utilization of mail magazines(2) Promoting diversification of tax return filing means through utilization of IT
Extending utilization of e-Tax and expansion of the Filing
Assistance on the NTA Website(3) Measures for filing period for final tax return Implementation of tax consulting services on Sundays(two Sundays) (services on government holidays)
 Further promotion of tax consulting services encouraging
taxpayers to prepare their tax returns on their own(4) Improving efficiency of the tax consultation system
Putting together general tax consultations to the Telephone
Consultation Center.

To promote the measures above, the NTA endeavors to attain

To this end:
 The roles of the national tax authorities, taxpayers
under the self-assessment system and Certified
Public Tax Accountants with public missions should
be realigned.

Overhauling Back-office Operations (including general services) Basic stanceWith consideration given to ensuring appropriate
operations, the tax authorities should promote
operational reforms responding to IT development
and outsourcing of work that can be done by nontax officials.

(1) Increasing the efficiency of back-office operations
Studying the amendment to the laws and regulations and system changes, which are necessary to promote the improved efficiency of back-office operations by bureau-level integration, andconducting trials involving centralizing a large volume of operations, which has to be dealt with in the meantime.
(2) Increasing the efficiency of general services
Promoting IT utilization for, centralization of, and outsourcing ofaccounting, health and welfare, and remuneration-related work

the optimum distribution of the limited staff resources,

For the whole of the government, the NTA will move forward with a phased approach for the45▲

Improving The Tax Payment Environment▲

In order to continuously fulfill the mandate of the people
under the above-mentioned difficult circumstances athome and abroad, the NTA may have to develop awork environment where tax officials can work actively
and more effectively and efficiently to tackle the NTA’s
mission to promote the proper and fair tax administration and improve the tax payment environment.

Taxation and tax collection growmore complicated and difficult“Optimization Plan ofbudget distribut
Operations and国税庁2006̲E̲0802 2006.08.18 17:22 ページ 46nand NTA’s Responses to Such Changes
Economic development of countries in Asia, globalization of accounting standards▼▼

Japanese-style employment practices are being shaken
and working styles are diversifying
Family structures are diversified
Etc.

Progress in globalization➞ Increasing inward and outward direct investment
People’s increasing cross-border movements
Sophistication of international tax avoidance schemes

Changes in the work environment for national tax officials(Number of women and child-raising officials are increasing and young officials’ attitudes are changing)▲ Regarding measures that should be implemented by
the tax authorities, the NTA, Regional Taxation
Bureau (Bureaus) and Tax Office (Offices) should
rebuild their respective functions

 The tax authorities should promote operational
reforms responding to IT development and outsourcing of work that can be done by others thantax officials

Overhauling Tax Examination and Collection Duties
 Basic stance

Developing a Work Environment for National Tax Officials
 Basic stance

The tax authorities should develop a work environment where tax officials can come to work withenthusiasm and hope.

(1) Improving tax examination and collection duties
Considering overhauling tax examination and collection systems
based on sharing of roles between Regional Taxation Bureaus
and Tax Offices(2) Roles of CPTAs with public missions
Promoting the new system for CPTAs to attach working papers
to tax returns(3) Addressing advanced areas
 Expanding international taxation including fighting againstinternational tax avoidance schemes
Responding to advanced information regarding corporate
activities
 Securing taxpayers’ predictability- Improving responses to taxpayer inquires- Utilizing advance price arrangements regarding the transfer
pricing taxation
 Responding to the consolidated taxation system(1) Endeavoring to realize a gender-equal society
 Promoting a personnel policy to make the most of female officials’ abilities and aptitudes
 Promoting the NTA action plan to achieve a balance between
childcare and work(2) Improving guidance and fosterage measures for young officials(3) Reforming training systems in response to changes in the environment surrounding the tax administration(4) Improving the work environment(5) Enhancing research functions at the National Tax College

budget distribution based on quantitative results, and the placement of the right people in the right jobs.
ofOperations and Systems Related to National Tax Administration” (issued on March 28, 2006)

by fiscal 2010.

46

Future Challenges

To maintain and improve taxpayers’ compliancewith law, the tax authorities should overhaul tax
examination and collection systems to implement
tax examination and collection more effectively andefficiently

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 47

VII Statistics
Tax Revenue and Budget
page 47

Taxation and Status ofTax Return Filing

page 48

Tax Examinations

page 49

Tax Criminal
Investigations

page 49

Reduction ofTax Delinquency

page 50

Budget and Actual Amounts of Tax and Stamp Revenues for
Fiscal 2004
Item

Remedy for Infringementof Taxpayer Rights
page 50
Tax Consultations

page 51

International Taxation

page 51

Taxpayer Satisfaction

page 51

Withholding income tax
Self-assessed income tax
Corporation tax
Inheritance tax
Consumption tax
Liquor tax
Tobacco tax
Gasoline tax
Liquefied petroleum gas tax
Aviation fuel tax
Petroleum and coal tax
Motor vehicle tonnage tax
Customs duty
Tonnage due
OthersStamp revenue
Subtotal
Incom tax (transferred)
Local road tax
Liquefied petroleum gas tax (transferred)
Aviation fuel tax (transferred)
Motor vehicle tonnage tax (transferred)
Special tonnage due
Crude oil customs duty, etc.
Power resources development
promotion tax
Gasoline tax
Special tobacco tax
Total
General AccountTax Revenue andBudgetBudgetActualMillion yen

Million yen

11,720,000
2,373,000
10,996,000
1,292,000
9,692,000
1,657,000
898,000
2,129,000
14,00090,000477,000
751,000
795,000
9,000—
1,148,000
44,041,000
424,900
303,500
14,00016,400375,500
11,30038,00012,184,627
2,485,870
11,443,691
1,446,457
9,974,306
1,659,860
909,737
2,191,036
14,33288,006480,274
748,847
817,659
9,036
251
1,135,024
45,589,013
424,900
310,099
14,332
16,001
374,423
11,29544,177359,300

372,596707,200
235,600
46,526,700

707,200
238,894
48,102,930

Note: “Others” include the tax delinquency currently being handled of the goods and service
tax, land value tax and so forth.

NTA Budget for Fiscal 2005
Item

BudgetNote: For each table, the period of the statistics is shown in
the title, above the table, or in the notes. A fiscal year
is the one-year period from April 1 through March 31of the following year. A business year is a one-year
period starting July 1 of the given year and ending on
June 30 of the following year. A calendar year is the
one-year period from January 1 through December 31.

General Expenditures

Million yen

IT-related Expenses
Expenses to improve convenience for taxpayers*1
Expenses related to internationalization measures
Expenses to improve work environment*2
Expenses related to tax reforms
Expenses for various taxation forms andcommunication expenses
General operating expenses*3
Expenses for National Tax College
Expenses for National Tax Tribunal
Expenses for National Research Instituteof Brewing
Subtotal
Personnel expenses
Total NTA budget

56,034
10,811
768
6,568
3,512
21,22541,401
2,889
479
1,193
144,880
570,820715,700

Notes: *1 “Expenses to improve convenience for taxpayers” include expenses related totouch-screen computers and the development of e-Tax and the Filing Assistanceon the NTA Website.
*2 “Expenses to improve work environment” include expenses to improve facilities
and health care expenses.
*3 “General operating expenses” include wages for part-time workers, travel expenses, honoraria for hired bookkeeping instructors, and PR expenses.

47

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 48

Taxation and Status of Tax Return Filing
Income Taxpayers

Inheritance Tax(2005 calendar year)(2004 calendar year)
Thousand persons

Number of deceased persons

1,028,602(1) Total population

127,690

Number of deceased persons subject to taxation

43,488(2) Workforce

63,290

Number of heirs subject to taxation

131,279(3) Number of final returns for income tax*

23,180

Taxable amount

9,861,800 millilon yen(4) Refund*

11,960

Amount of tax

1,065,100 millilon yen(5) Tax payment*

8,290(6) Of (5), wage earners whose income tax
is withheld

2,960(7) Number of employment income earners

41,710(2004 calendar year)(8) Of (7), taxpayers for whom only year-end
adjustments are made [(7)-(6)](9) Number of taxpayers [(5)+(8)](10) Percentage of workforce that pays tax [(9)/(2)]38,750

Number of persons subject to taxation

47,040

Value of property acquired

74.3%

Note: (3), (4) and (5) are figures for the 2005 calendar year. The others are those for the2004 calendar year.

Withholding Agents and Withholding Income Taxation

403,814
2,310,100 millilon yen

Amount of tax

96,600 millilon yen

Note: The data above is under taxation system for settlement at the time of inheritance.

Consumption Tax(2004 business year)(2004 fiscal year)

Number ofWithholding
Agents*Amount ofTax

Thousands

Employment income (wages and salaries)

3,867

Million yen

9,983,300

Retirement income—

314,500

Interest income, etc.

42872,500

Dividend income

129

1,288,900

2

106,800

3,105

1,162,500

Capital gains of listed stocks held inspecial accounts, etc.
Remunerations, fees, etc.
Income paid to non-residents andforeign corporations
Total

24

262,200—

12,990,700

Note: Figures for withholding agents are as of the end of June 2005.

Number of
Returns

Income Classification, etc.

Gift Tax

Tax Payment

Tax Refund

Thousand cases

Thousand cases

Individual

407

16

Corporation

1,613

96

Total

2,020

112

Amount of tax

9,517,200 millilon yen

1,898,700 millilon yen

Liquor Tax and Liquor Production(2004 fiscal year)

Classification

Production Volume

Amount of Tax

Thousand kl

Million yen

Sake

524

94,950Sake compounds

38

4,961

1,043

226,891

ShochuMirin (rice cooking wine)

103

2,274

3,844

844,039

Number of Corporations and Number ofCorporation Tax Returns Filed

Beer
Fruit wines

70

5,799

(2004 business year)

Whiskies

72

28,669Number of corporations*

2,949,000

Spirits76

7,791

Number of tax returns filed

2,742,000

Liqueurs

714

60,835Percentage of corporations filing89.7 %

Percentage of returns declaring a surplus

31.5 %

Amount of self-assessed income

43,173,600 millilon yen

Amount of self-assessed loss

23,357,600 millilon yen

Amount of tax

11,123,000 millilon yen

Miscellaneous liquors
Total

2,564

305,325

9,047

1,599,550

Note: The figure for “number of corporations” is as of the end of June 2005.

Statistics

48

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 49

Tax Examinations
Examinations for Self-Assessed Income Tax

Examinations for Consumption Tax(2004 business year)(2004 business year)

Total
Unrecorded Total Additional Additional Tax
Number of Unrecorded Income per Tax Revenue Revenue Collected
Cases
IncomeCase
Collected
per Case
Field
examinations

Thousands

Special,General48

Focusing

Millionyen

Thousandyen

434,900

8,990
1,830

Millionyen

Number of
Total
Additional
Cases with Additional Tax Revenue
Number of Unrecorded Tax Revenue Collected
Cases
IncomeCollected
per Case

Thousandyen

91,2001,890

191351,000

17,70090

Brief contact

541

110,300

200

7,200

10

Total

781

896,300

1,150

116,200

150

Notes: 1. “Special, General ” refers to the focused examination for the malicious taxpayer.
2. “Focusing” refers to the short term examination to grasp the unrecorded income.
3. “Brief contact” refers to the correction of tax return errors by speaking with the
taxpayer by telephone or by asking the taxpayer to visit the Tax Office.

Examinations for Withholding Income Tax(2004 business year)

Number of
Cases Examined

Of Which,
Number of Illegal Cases

Total Additional Tax
Revenue CollectedThousands

Thousands

Million yen

169

47

66,200Thousands

Thousands

Million yen

Thousand yen

Individuals

30

21

14,600490

Corporations

111

57

49,700450

Field Examinations for Inheritance Tax(2004 business year)

Number of
Total
Total
Additional
Cases with Amount of Unrecorded Additional Tax Revenue
Number of Unrecorded Unrecorded Inheritance Tax Revenue Collected
Cases
Income Inheritance per Case
Collected
per Case
Thousands

Thousands

Million yen

Thousand yen

Million yen

Thousand yen

14

12

400,300

33,65079,9006,720

Information Returns Collected(2004 business year)

Field Examinations for Corporation Tax

Name of Information under
Mandatory Submission(2004 business year)

Total
Unrecorded Total Additional
Number of Unrecorded Income
Tax Revenue
Cases
Incomeper CaseCollected
Thousands

Millionyen

Thousandyen

Millionyen

124

1,491,400

12,020360,100

All corporations
Of which,
corporations
handled by theLarge Enterprise
Examination
Department

4

786,400

178,198

184,100

Number of Returns
Collected
Thousands

Withholding record of employment income

19,815

Payment record of interest and others

919

Payment record of dividend,distribution of surplus
and interest on guaranty capital

7,500

Withholding record of public pension, etc.

31,142

Payment record of remunerations,fees, contract payments, and prizes

8,244

Payment record of consideration for transferof stocks, etc.

7,688

Record of remittance to foreign countries

3,569

Others28,520

Total

107,397

Tax Criminal Investigations
Prosecuted Cases by Tax Item
(2005 fiscal year)

Tax Criminal Investigations(2005 fiscal year)

Numberof Cases
Conducted

Numberof Cases
ClosedNumberof Cases
Prosecuted

217

214

150

Total
Tax
EvasionTax
Evasionper Case

Total Tax
Tax
Evasion (in Evasion per
Prosecuted Prosecuted
Cases)
Case

Million yen

Thousand yen

Million yen

Thousand yen

27,400128,11423,000153,069

Large-Scale Cases(2005 fiscal year)

49

Number of
Cases Prosecuted

Of Which, Number ofCases Prosecuted witha Tax Evasion Amountof 300 Million Yenor MoreOf Which, Number ofCases Prosecuted witha Tax Evasion Amountof 500 Million Yenor More

150

16

5

Tax Item

Number of
Cases

Total Tax
EvasionMillion yen

Tax Evasion
per Case
Thousand yen

Income tax

47

6,200

130,974

Corporation tax

86

10,200118,562

Inheritance tax

4

5,000

1,251,011

Withholding income tax

3500

161,340

Consumption tax

10

1,100

112,022

Total

150

23,000153,069

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 50

Reduction of Tax Delinquency
Tax Delinquency Cases of 100 Million Yen or More by Industry

Seizure of Property(as of the end of the 2005 fiscal year)(2004 business year)

Industry

Number of Persons

Amount of Tax%

Million yen%

Number ofDelinquent
Taxpayers

Number of
Objects
Seized347

44,752

1,296

37,65049,044

97,165211,256

Appraisal
Value

Manufacturing industry

72

4.4

15,244

3.4

Distribution industry

100

6.1

44,3499.9Real estate andconstruction industry

431

26.3

106,761

23.9

ClaimsFood and beverageindustry

95

5.8

17,277

3.9

Immovable
property, etc.

8,212

30,794

1.8

Others

3,566

23,350

2,725

25.7

Total

49,775

147,940

312,442

Percentage[(4)/(1)]Percentage[(4)/(3)]Financial industry

31

1.9

8,246

Other industries*1

432

26.3

114,796

Others*2

480

29.3

140,192

31.4

1,641

100.0

446,865

100.0

Total

Million yen

Movable property

Notes: *1 “Other industries” includes hospitals (doctors), the service industry, and the leisureindustry.
*2 “Others” includes salaries workers and pension recipients.

Remedy for Infringement of Taxpayer Rights
Requests for Reinvestigation

Classification

Number of
Illegal Cases(1)

Tax assessment

431,000

Number of New
Number ofRequests for
Requests for Reinvestigation
Reinvestigation(2)

Percentage[(2)/(1)]

Number of
Cases
Processed(3)

Number ofRequests
Approved

%

%

4,124

609

0.14

14.8

(4)

%

5,306

3,891

0.9

Tax collection

—

435

381

—

392

1

—

0.3

Total

—

5,741

4,272

—

4,516

610

—

13.5

Number of
Cases
Processed(3)

Number ofRequests
Approved

%

%

3,146

488

0.11

15.5

Requests for Reconsideration

Classification

Number of
Illegal Cases(1)

Tax assessment

431,000

Number of New
Number ofRequests for
Requests for Reconsideration
Reconsideration(2)

Percentage[(2)/(1)]

(4)

%

5,450

2,801

0.6

Percentage[(4)/(1)]Percentage[(4)/(3)]Tax collection

—

371

286

—

236

5

—

2.1

Total

—

5,821

3,087

—

3,382

493

—

14.6

Requests for Litigation

Tax assessment

431,000

Number of
Litigation
Cases

Number of the First Instance
Newly
Filed
Percentage(2)[(2)/(1)]

Number of
Cases
Closed(3)

Number of Lost
in Litigation andPartial Defeat Cases Percentage(4)[(4)/(1)]

%

936

281

0.1

387

Percentage[(4)/(3)]

%

%

54

0.01

14.0

Tax collection

—

144

64

—

86

3

—

3.5

Total

—

1,086

346

—

478

57

—

11.9

Statistics

Classification

Number of
Illegal Cases(1)

Notes: 1. The figures for “Number of Illegal Cases (1)” are the following numbers for the 2004 business year:
In tax assessment cases: The total number of illegal cases for which field examinations regarding self-assessed income tax, withholding income tax, corporation tax, consumption tax, and inheritance tax are conducted.
2. The “Number of Requests for Reinvestigation” and the “Number of Requests for Reconsideration” are the figures for the 2004 fiscal year.
3. The “Number of Litigation Cases” is the total number of litigation cases for each level of trial for the 2004 fiscal year.
4. The “Total” Number of Litigafion Cases includes the cases for National Tax Tribunal and Regional Tax Tribunals.

50

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 51

Tax Consultations
Number of Tax Consultation Cases Handled by
Tax Counsel Offices and via Tax Answer System

The Five Most Frequent Tax Consultation Topics(2005 fiscal year)(2005 fiscal year)

In-Person and Telephone Consultations

Number of Tax Consultations

Thousand cases

Income tax
Corporation tax

Ranking

Tax Item

Topic

1

Income tax

Obligation to file returns andfiling procedures, etc.

257
138

1,439
196

Thousandcases

Property tax

772

Consumption tax

120

2

Income tax

Medical expenses deduction

Other indirect taxes

55

3

Income tax

Tax collection

71

Preparation of tax returns, statementsof accounts, and other forms

114

Income tax

Special credit for loans relating to a dweling

106

Income tax

Fliling returns for refund

94

Others242

4

Subtotal

2,895

5

Tax Answer System
Total

29,881
32,776

Tax Answer System(2005 fiscal year)

Number of Complaints Received at Tax Counsel Offices

Ranking

Tax Item

Topic

1

Income tax

Cases in which funds are spent on
medical expenses(medical expenses deduction)

761
547

Thousandcases(2005 fiscal year)

Income tax

620

Corporation tax

334

2

Income tax

Tax rate of income tax

Property tax

88

3

Income tax

Consumption tax

55

Medical expenses subject to medical
expenses deductions

468

Income tax

Exemption for spouse

398

Income tax

Special treatment that can be received
according to the spouse’s income(special exemption for spouse)

394

Other indirect taxes

94

Tax collection

54

5

Others

181

Total

1,341

International Taxation

Taxpayer Satisfaction

Fraudulent Income Made through Overseas Transactions(2004 business year)(2004 business year)

Item

Number of cases of fraudulent overseas income

76 cases

Amount of fraudulent income made overseas

11,800 million yen

Enforcement of Transfer Pricing Taxation

High Satisfaction Rate%

Attitude of officials in providing services

79.3

Level of convenience in using Tax Office

56.2

Evaluation regarding PR activities

63.8

Evaluation regarding activities to collectpublic opinions(2004 business year)

Number of cases closed

82 cases

Amount of taxable income

216,800 million yen

Level of satisfaction with consultations at Tax Counsel Offices

79.2

In-person

89.4

Telephone

67.8

Note: “High Satisfaction Rate” is the percentage of taxpayers who gave high evaluations(“good” and “somewhat good” responses on a five-grade scale between “good” and“bad”) to the item in a questionnaire survey.

51

国税庁2006̲E̲0802 2006.08.18 17:22 ページ 52

Reference
Information for Taxpays Who Are Going to Use e-Tax
User(1) Procedure for notification of start
using e-Tax

Tax OfficeTransmission or
sending

Review of notification of start using e-tax

Sending(2) To install the e-Tax software, change
the password and register the digital
certificate

Sending the identification number of theuser, the password and the e-Tax
software (CD-ROM)

e-Tax(3) To prepare the filing data and transmit
them attaching the digital signature(acceptance system)
Transmission

To process the filing data
(4) To confirm the result of receiving(1) Please perform the procedure for notification of start using e-Tax
Upon using e-Tax, please perform the procedure for notification of the start using e-Tax in advance online from the e-Tax website(http://www.e-tax.nta.go.jp -- Japanese only). After this procedure has been undertaken, the identification number of the user and thee-Tax software, which are necessary to use e-Tax, will be sent.
The user may undertake this procedure even in writing.
• Upon transmitting the filing data by e-Tax, so that the NTA can confirm that the data are drawn up by the taxpayer himself/herself and not altered by anyone, the taxpayer is required to affix a digital signature in place of setting his/her handand seal to the document. To this end, it is necessary to prepare a digital certificate in advance. Taxpayers wishing to use
the digital certificate issued by the Public Certification Service for Individuals must obtain the Basic Resident Register Cardand introduce an issued digital certificate on it at the municipal office.
• Most digital certificates, including those issued by the Public Certification Service for Individuals, are stored in the IC card.
So, in this case, please prepare an IC card reader/writer.
• Information concerning digital certificates applicable to e-Tax and financial institutions to which electronic tax payment isavailable, is accessible on the NTA website.

(2) Please install the e-Tax software, change the password and register the digital certificate.
After the procedure for notification of start using e-Tax has been undertaken, the notice of the identification number will be sent by
the Tax Office. So, please prepare for the use of the e-Tax software.
1) Please install the e-Tax software (CD - ROM) on the personal computer.
2) The identification number of the user which is necessary for security purposes when using e-Tax is stated in the notice of theuser’s identification number. Please change the password and register the digital certificate to be used.

(3) Please prepare the filing data and transmit them attaching the digital signature and others.
Please use the e-Tax software and prepare the filing data, and transmit them attaching the digital signature and digital certificate.
• Concerning the final returns of income tax and consumption tax or the financial statements for blue returns, taxpayers may
prepare the filing data using “Filing Assistance on the NTA Website,” and transmit them using e-Tax.

(4) Please confirm the result of receiving.
Regarding the result of the review of the filing data and others as transmitted, the notice of receiving is stored in the message box
set for each user. The user may confirm the content of the notice by the said message box.
For further information about e-Tax, please see page 17.

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National
Tax
AgencyReport2006
Issued in August 2006
Edited by the National Tax Agency
3-1-1 Kasumigaseki,
Chiyoda-Ku, Tokyo, 100-8978
TEL: 03-3581-4161 (Representative No.)
NTA website: http://www.nta.go.jp

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ドキュメント1 2006.08.18 17:07 ページ 1

Going online to make it easy!

Online Tax Return Filing and Tax Payment System
For detailed and further information,please visit the e-Tax website (Japanese only).

*The website provides the latest information on e-Tax andnecessary procedures and the like for using e-Tax.

Your taxes help to sustain our community