THIS MONTH AT THE TAX OFFICE (principal items only)
- Individual business tax, 1st installment due on the date set by municipal ordinance in August
- Individual prefectural & municipal resident tax, 2nd installment due on the date set by municipal ordinance in August
- Interim consumption tax return, individuals filing due in August
- Companies with a June fiscal year-end final returns for corporate tax & consumption tax due
- Companies with a December fiscal year-end interim returns for corporate tax & consumption tax due
A NOTE ON KSK2
The National Tax Agency’s core administrative system — the KSK, its back office for essentially everything — has run since 2001. On September 24 this year it migrates to a new system, KSK2. The headline changes are a shift from paper to data, and from a closed system to an open one. Little changes for taxpayers filing through e-Tax itself; more on what that means is in the column at right.
Nothing Stays Hidden for Long
An earthquake, a tax cut nobody in Tokyo quite agrees on, and a tax bureau about to see nearly everything at once — one August, in three parts.
The rainy season broke, and the heat set in hard enough that more than a few of my
clients have told me they didn’t quite register it was August until they glanced at a calendar. In Kumamoto, that same sun is falling on people who have lost their homes,
and on the rescue workers still going through what’s left of them. I hope, as much as
anyone, for a fast recovery.
None of that has slowed Tokyo down. Prime Minister Takaichi has said, in no uncertain
terms, that she intends to cut the consumption tax on food by one percentage point, for
two years. Her own party is not fully behind her, and the question now is whether she
pushes it through anyway, in the manner she’s become known for. There is a real argument for the cut — food prices have climbed hard enough that a countermeasure isn’t
absurd. But the case against it is serious too: real fiscal cost, real economic risk, and two
years of extra administrative burden for businesses to run a tax rate that will only exist
temporarily. Japan’s own social security council studied a food tax cut once before and
reached no conclusion at all, which, read the other way, tells you how large the problems
were. What’s being proposed now would undo, in a single stroke, decades of careful,
incremental work by an earlier generation of policymakers who built the consumption
tax from nothing and raised it a point or two at a time, each increase its own political
fight. Whether this turns out to be courage or recklessness may become clear sooner than
anyone expects. On July 30 and 31, the government and the Bank of Japan carried out an
enormous intervention to buy yen — a move that looks less like routine currency management and more like preparation for a rough Monday in Japanese markets once
the tax debate resumes in earnest. One percentage point on the consumption tax may end up being one of the more consequential policy decisions in recent Japanese economic
history.
If the politics around that decision are playing out entirely in public, the machinery of the
tax authority itself is being quietly rebuilt so that even less stays hidden from here on.
Business owners here should understand what that means in practice. Under the new system, a tax office will be able to look across categories that used to sit in separate silos
— pulling up, say, the corporate tax, income tax, and gift tax records of everyone in a family enterprise on a single screen, then cross-checking that against a trading partner’s
account breakdown and general ledger, and drawing conclusions from the pattern. An online tool called GSS, already in use, lets examiners do this work on-site, during the
audit itself. To anyone in a genuinely digital industry, none of this sounds cutting-edge
— it sounds overdue. But for the rest of us, it likely means tax office questions get harper,
and more specific, from here.
One more thing worth flagging before I close: Ehime Bank has announced it is moving
toward integration with Iyogin Holdings, the parent company of Iyo Bank. This isn’t
background noise — it goes directly to how local businesses get financed. I’ll be watching
how the merger unfolds, and thinking through, in future letters, what it should mean for
how business owners here regard their relationship with their bank.
Between an earthquake that exposed what was underneath the ground, a tax office about
to expose what’s on every ledger, and two banks about to become one, this is shaping up
to be a season when very little gets to stay hidden. Whether that turns out to be a good
thing probably depends on what was hidden, and why.
