You know that the recession is getting serious when even the National Tax Agency is reduced to twiddling its thumbs. The amount of unclaimed income that tax investigators discovered last year was ¥19.2 billion, comprising a measly 189 cases, the lowest since 1978. Moreover, of all the cases they investigated, only 61.9 percent were prosecuted, the lowest rate since 1973.
It should be noted that these numbers actually apply to tax returns or lack of reporting that occurred in 2008, since it takes about three years for the agency to complete an investigation before deciding on whether to pursue prosecution. So these numbers could simply be a temporary dip owing to the fact that 2008 was the year of the Lehman Brothers failure that jump started the whole economic crisis. However, there are other factors at play.
A tax agency official recently told Tokyo Shimbun that “prosecutors’ attitudes” changed after several recent scandals in which the legality of their methods were questioned, in particular that case in Osaka where a prosecutor cooked up evidence to nail a health ministry bureaucrat. Consequently, prosecutors are a bit gunshy about borderline cases that they would have pursued more aggressively in the past. In addition, over the years tax evaders have become more skillful at hiding income thanks to advances in information technology and the globalization of finances.
But a former tax official told Tokyo Shimbun that he thinks the quality of the auditing has also gone down. When he was an investigator, new recruits were trained under the strictest, most punishing circumstances. Veteran auditors put the screws to their underlings to make sure they were tough and relentless in getting as much evidence against tax scofflaws as they could.