Overview of the Arrest
On February 18, 2021, the Investigation Department (the "Marusa") of the Tokyo Regional Taxation Bureau and the Metropolitan Police Department arrested Shinichi Hashimoto, 49, the representative director of "XX Enterprise Co., Ltd." (Shinjuku Ward), which operates an outcall sex-service ("delivery health") business, on suspicion of violating the Corporation Tax Act (tax evasion).
According to the investigation, over the three fiscal years from 2017 to 2019, Hashimoto kept part of the revenue off the books and managed it as slush funds. The unreported income amounted to about 100 million yen, and the evaded tax — corporate tax and consumption tax combined — is said to total roughly 30 million yen.
The Method and How It Was Uncovered
Hashimoto allegedly spread part of the revenue across accounts in employees' names and made it appear small on the books. However, a tax investigation found a marked discrepancy between the establishment's reservation-system data and customer payment records on the one hand and the reported amounts on the other. After undercover work, the arrest followed.
Tax Issues in the Sex Industry
The sex industry has a high proportion of cash transactions and a structural tendency toward opaque bookkeeping. The National Tax Agency has positioned "entertainment and dining businesses and special businesses related to the sex industry" as one of its priority audit targets, and in recent years both the number of investigations and the amount of additional tax assessed have been on the rise.
Among tax accountants, there are voices saying that "to improve tax compliance in the industry, the involvement of professionals who support accurate bookkeeping and proper tax filing is indispensable."
This article was compiled from publicly available information.