Peter wrote earlier today how Japan is a very cash-based society. Underlining that point, a story has been reported which is not unusual in itself except in its sheer magnitude.
Hearing that someone in Japan has a fortune in cash stashed somewhere about their house is relatively common. There are various reasons for this, one of which is the poor return on savings with banks with interest rates close to zero.
But two sisters from Osaka were hiding their wealth from the taxman, it’s reported. They are suspected of “hiding about 5.93 billion yen inherited from their father, who founded a group of eight firms including real estate leasing and loan companies.”
That comes out to about US$57,000,000. In cash. In their house.
After investigators found “more than 5 billion yen in cash [which] was found in cardboard boxes in a garage”, one of the sisters fessed up, the other said she had “forgotten about [the] cash kept in her home.”
They are charged with “evading about 2.86 billion yen [US$28 million] in inheritance tax, the highest figure for a case involving inheritance tax evasion recorded in Japan”.
A rate of inheritance tax equal to almost 50% is unreal. Is that normal in other countries where inheritance tax is levied? (Seems to me that - generally speaking and unless I’ve got it fundamentally wrong - the inherited money represents money saved by the father after he had paid his income taxes payable over the years while he was still alive. In other words, the government is double-dipping here.)
I have been told more than once that the objective of the Japanese inheritance tax is so wipe out family fortunes. within a few generations.
When fortunes are tied up in land or other non-cash assets, survivors are forced to sell off the assets to pay the inheritance tax. Besides service charges and taxes normally incurred to conduct the sales, they also are hit for another hefty chunk by the government if the sale results in a capital gain.
It’s a racket, isn’t it. In the UK, after an allowance (which gets chipped away every year in the Budget), it’s 40%. That’s the rate ‘on death’, though they can also tax “lifetime transfers” - get this,
“Where a donor of a lifetime gift dies within seven years of making the gift, IHT may be due on the gift.”
Nice.
But there’s so much about this story that’s fishy to me.
6 billion yen in cash? What were daddy’s businesses, exactly? In cash in boxes in the garage? Was it really only the taxman they were hiding it from? Was their only plan for all that money to leave it in the garage?
This sounds like some modern fairy tale, where instead of a pile of skulls, the ladies have a pile of cash . . .
Yup. This was about 15 years ago, but my in-laws had about $400,000 cash in their house at one point. Only for a few days - changing accounts or something. None of that mysterious electronic bank transferring mumbo jumbo for them! But jeez!! What if the house burned down? Crazy.
See - that’s the thing that all those foreign brokerages etc that came into the market after the Japanese gov’t loosened up the financial markets never really ‘got.’
They came to scoop up the maturing term deposits from the postal system. But old Japanese people, like ALL old people are really conservative and can’t be bothered to learn something new. Like mutal funds? Ha! Who cares if they get 0.000000001 percent interst at the PO? To them, it’s SAFE.
40% Overoften? No wonder one of your countryment wrote this song. . .
International comparison on taxes :
(From the top), Asset tax (including inheritance tax ), Consumption tax, Corporation tax, Income tax.
Countries : Japan, US, UK, Germany, France, Sweden.
http://www.mof.go.jp/jouhou/syuzei/siryou/021.htm
On this figure the inheritance tax in Japan is not that high.
I don’t know about those figures, TU.
Japanese government ministries and agencies are notorious for putting out cooked numbers for local consumption to keep the populace feeling smugly complacent about how lucky they are to be living in Japan.
If you GOOGLE the words “japan inheritance tax” (without the quotes), you will find plenty of articles about how high the tax is from both domestic and foreign sources.
ED, a friend of mine told me exactly the same thing on ” cooked statistic number by governmental agencies “.
Anyway, as for Asset tax France has quite high figure, and I understand tax or social welfare burden in Japan isn’t that high unlike European countries. ( But for relatively poor social welfare, tax isn’t low neither in Japan like this case.)
Actually, TU, I was very surprised to hear from overoften recently about the very high taxes on gasoline and tobacco in the U.K. It makes Japan sound cheap by comparison.
Woohoo, we just recently beat Sweden as the most taxed nation in the world at an astounding 48.xx% (can’t remember the exact figure). We have always had a friendly neighbour rivalry going (well, apart from all the wars up till couple of hundred years ago) but this is one record I’d gladly have let them keep. Here, the rules on inheritance are, that the first ¥ 3,815,000 are not taxed. The part going to the spouse or legal partner is not taxed. Inheritance to immediate family, siblings, living parents and children is taxed by 15%. Other recipients are taxed 40¤.