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Mar. 10, 2015 - Updated 04:16 UTC



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Tracing Business in Tax Havens

Dec. 20, 2016

In the second part of our special report on the so-called "Panama Papers," we look into major Japanese companies that are using tax havens.

The documents were leaked from the law firm Mossack Fonseca, which is based in the Central American country. The data they contain includes information on more than 210,000 shell companies and it reveals the hidden assets of world leaders and their associates.

The massive trove of data was first leaked to German newspaper Suddeutsche Zeitung. It was shared with the International Consortium of Investigative Journalists, or ICIJ, and then with journalists all over the world.

Governments are trying to create a network to stop the use of tax havens for tax evasion. But their efforts are being complicated as many global companies use them for daily business activities.

NHK joined an international network that has been analyzing the Panama Papers. The papers hold confidential data on shell companies established in tax havens. They include personal information of company representatives and shareholders. The total number of Japanese on the list is over 700.

We began tracking each of these people down. As we reviewed the addresses and titles, we came across names associated with major Japanese trading firms.

A team from NHK met with a journalist from Taiwan to exchange information on a shell company that Japanese and Taiwanese firms have both invested in. The shell company is located in the British Virgin Islands.

The Japanese and Taiwanese firms had also invested in another firm in Nanjing, China, and received dividends. Normally, such dividends would be reported as profits, and the Taiwanese and Japanese investors would pay taxes on them to their respective authorities. But our investigation revealed that the Taiwanese firm may not have been doing so.

"Until right now, actually Nanjing company didn't send any money back to the parent company (in Taiwan)," says Chen Yi-shan, deputy editor of CommonWealth Magazine.

How about the Japanese company? The firm told us that it had paid taxes in accordance with the law.

In another case, a major trading firm was trying to set up a shell company with an Iranian national oil firm. Its representatives say that the aim of the shell company was to conduct feasibility studies on Iranian infrastructure. But they explain they didn't complete the establishment process, because they couldn't find common interests with the Iranian firm.

All Japanese firms we spoke with said that they pay taxes properly. They add that the taxes that are imposed on them are based on what they reveal to the authorities.

The head of the National Tax Agency, Hidenori Sakota, told us that it's not easy to tackle the issue.

"Honestly speaking, it is very difficult to grasp the scope of international tax evasion using tax havens. After the Panama Papers' release, the public took a growing interest in the issue. I think we need to step up our efforts to keep an eye out for tax evasion, and investigate if necessary," Sakota said.

The companies are the ones who decide how much information to disclose about their activities in tax havens, and such places can keep some of their business covered.

NHK World chief correspondent Yoichiro Tateiwa joins anchor Aki Shibuya in the studio.

Shibuya: Yoi, so the lack of the transparency is the problem with tax havens?

Tateiwa: That's right. Both the business community and tax authorities say it is not illegal to use tax havens if taxes are being paid properly. But as we discussed, the question is whether companies are disclosing everything.

Gerard Ryle, who leads the entire operation analyzing the papers, had this to say.

"If you are working in Japan, why would you want to go British Virgin Islands to get some kind of company? There has to be a reason. It might be legitimate but if it's legitimate, let's just make a transparency if there is no problem. Why they all want secrecy."
Gerard Ryle / ICIJ Director

Shibuya: Are any efforts being made to make tax havens more transparent?

Tateiwa: Discussions are underway among the OECD countries. And in the EU, there are talks on whether to introduce strict rules to require companies established in tax havens to disclose information. In Japan, such firms are obligated to do so. But a source at the tax agency told me that authority believes that it is not receiving all the information companies are supposed to disclose.

One country cannot deal with the issue. There must be international collaboration of authorities to tackle any kind of tax evasion using tax havens.

Shibuya: Speaking of international collaboration, in this series on the Panama Papers your team worked with journalists from Hong Kong and Taiwan.

Tateiwa: That's right. We collaborated with many journalists overseas. And not only that, we worked with Japanese journalists working for other institutions as well. And this collaboration among journalists was the key element of the project investigating the Panama Papers.

If the Panama Papers had only been investigated by one German newspaper, most of the information would not have been made public. But through ICIJ, 400 journalists around the globe were able to dig deeper into the story and achieve substantial results.

Many journalists who took part in the project say it's a "revolution." I think we are going to see more and more collaboration among journalists across organizations and borders.