TOKYO: Japanese tax authorities may soon have the power to seize such online data as email and digital documents in tax evasion probes, bringing efforts to curb cheating into the modern age. The Ministry of Finance will detail planned revisions to investigation rules when the government’s Tax Commission meets this month. Legislative changes needed to allow such measures as data seizures and overnight raids will be discussed with the ruling Liberal Democratic Party’s tax committee through year-end and will likely be included in a major reform package for fiscal 2017. This will mark the first significant update to laws governing national tax violations since 1948.
Japan’s tax inspectors currently cannot access data held on tax-cheating suspects’ computers or servers unless given permission, since there is no explicit legal provision for the seizure of electronic information. While many suspects do choose to turn over information, attorneys or accountants can refuse to cooperate. Under the proposed changes, investigators would be able to copy and view information on computers seized from suspects’ homes or offices without first asking permission. Email, account books and other material on servers, such as those in the cloud, could also be requested from service providers.
Internet providers already cooperate with tax authorities to some extent but run the risk of lawsuits over violating users’ privacy. The new rules would give such companies some protection. Wariness of granting tax investigators too much power has kept Japan from changing the provisions until now. But international efforts to combat tax avoidance are picking up speed following the release of the Panama Papers earlier this year, pushing the country to keep pace. The current difficulty of examining digital correspondence between companies and overseas units or accounting firms creates sizable barriers to uncovering tax dodgers. Proposed changes would deepen cooperation in this area between Japan and other countries.