Japan’s gamblers really don’t like paying taxes on their winnings

TAGs: Japan

japan-gambling-winnings-tax-avoidanceJapan’s gamblers are notorious tax scofflaws, according to a new survey by government auditors.

On Wednesday, the Yomiuri Shimbun reported on a recent survey conducted by Japan’s Board of Audit, which discovered that only about 5% of gamblers who’d enjoyed lump-sum payouts of ¥10.5m (US$93k) or higher in 2015 accurately reported their winnings to the tax man and paid the required tax obligation to the government.

The Board cross-referenced a sample of 531 cases involving a combined ¥12.7b in winnings with 18k tax returns to see who declared what. Only 27 cases involving around ¥1.54b were found to have accurately declared their winnings and some of these cases involved amended tax returns, in other words, the individuals had only declared their winnings after tax authorities detected undeclared income.

Gambling winnings up to ¥500k ($4,435) are considered ‘occasional income’ and are exempt from tax, while half of anything over that sum is considered taxable income. There are also concessions made to bettors whose primary income is derived from gambling that allows these individuals to deduct their gambling losses to offset their tax obligations.

Japan recently approved the construction of up to three resort casinos, but they aren’t likely to open their doors for another five years or so. In the meantime, Japan’s gamblers have only pachinko, state lotteries and a variety of races – horses, boats, bicycles and motorcycles – on which to wager.

Thing is, Japan’s gambling operators aren’t currently required to verify the identity of individuals either purchasing gambling products or receiving gambling winnings. This loophole doesn’t apply to online lottery or betting services, which leave a digital trail to bank accounts and other financial entities.

Japan’s National Tax Agency has urged the Finance Ministry to require all gambling operators to tighten their oversight of sales and payouts, but the Ministry has so far failed to act. However, the prospect of new casinos may be sparking a new sense of urgency, signaling an end to local residents’ ability to dodge their tax obligations.

In June, Japan’s government began wrestling with the problem of how to tax the winnings of the hordes of international tourists who are expected to patronize the country’s new casinos.


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