Japanese Companies in Panama Papers

Newspapers reported on Wednesday that hundreds of persons or corporations were listed on Panama Papers, which revealed a great number of cases taking advantage of tax haven. Although it was not illegal for an entrepreneur to establish corporation in tax haven, Japanese companies were using that underground community for promoting business in emerging economy such as China. They risked being suspected to have escaped from taxation.

Panama Papers are made by a Panamanian law firm that helps entrepreneurs establish new company. It includes 210,000 companies dealing with tax haven and 370,000 names of stockholders or board members of corporations in over 200 countries or regions. A German daily newspaper, Süddeutsche Zeitung, obtained the document and International Consortium of Investigative Journalists is analyzing its contents.

According to Asahi Shimbun, there were 400 of names whose address was in Japan. After detailed consideration, they included 20 Japanese companies and 230 Japanese citizens at least. Kyodo News counted 270 names in it. Those companies included major trade companies such as Itochu or Marubeni. Chief Executive Officer of Ueshima Coffee Co., Ltd was also on the list.

To the question of Asahi Shimbun, some stockholders answered that they established company in tax haven for escaping regulation in China or to conceal their identity as Japanese company from the eyes of the Chinese consumers. When a company wants to invest in China, it will have to establish a company in every region. Accounting standard and taxation system are different from those in Japan and it is difficult to retreat, because of complex labor system.

One man in furniture trading business bought a company in Virgin Islands with cost of ¥100,000. That was because his business client in China asked him opening a bank account in Hong Kong for money transfer. He searched in internet and found a firm that fixed up a paper company with an account of major bank. “ Because establishing a company in Hong Kong takes much money, I chose tax haven,” he said.

Political impact is not clear so far. In European countries, Panama Papers caused resignation of a prime minister or unpopularity of another prime minister who firmly supported remaining in European Union. If the papers include some name of political leaders in Shinzo Abe administration, instability of Japanese politics will affect a lot of important policies.