Stuck in the Edo Period: Why the Global Notion of “Taxpayers as Customers” Hasn’t Taken Root in Japan.

Tax audits and collections without prior notice… Japan is the only country without a “Taxpayer’s Bill of Rights.”

While paying taxes is stipulated as a duty in the Constitution, there is no mention of rights. How should we understand taxpayer rights?

“‘Taxpayer rights’ does not mean that we, as taxpayers, should assert our rights. What’s important is that rights are properly protected.

In the United States, where taxpayers are the main focus, tax authorities treat taxpayers as customers with respect. Similarly, South Korea’s Taxpayer Bill of Rights also positions taxpayers as customers. The idea of taxpayers being the main actors is becoming a global standard.

However, in Japan, the opposite is true; the main focus is not on the taxpayer but on the tax authority. The image of taxes being something that is taken by those in power has persisted from the Edo period through the Meiji era to modern times, and those collecting taxes still carry this mindset.”

Since the establishment of the ‘Taxpayer Charter’ in France in 1975, Western countries have been advancing systems to protect taxpayer rights, and this movement has spread to countries in Asia and Africa as well.

According to the TC Forum, Japan is the only member of the OECD (Organisation for Economic Co-operation and Development) that lacks a Taxpayer Bill of Rights or a law protecting taxpayer rights.

“The TC Forum has visited countries like the United States, Canada, and France, which have taxpayer rights charters, and received recommendations from the OECD to establish a charter. In 1994, we published the ‘Basic Law Outline for Taxpayer Rights’ and the ‘Tax Administration Procedure Law Outline.’ Nearly 30 years have passed, but Japan still lacks a Taxpayer Bill of Rights.

The reason a charter hasn’t been established is that the Ministry of Finance is reluctant to recognize taxpayer rights. In fact, it doesn’t recognize them, which is why tax audits and collections are still being conducted without prior notice.”

 

“Penalties have been greatly enhanced.”

Seventeen years after the TC Forum’s proposal for the “Tax Administration Procedure Law,” tax audit procedures were codified in 2011 under the Democratic Party administration with amendments to the “National Tax General Law.” However, Hiraishi points out that this revised law does not contain provisions to protect taxpayer rights.

“The revised National Tax General Law clearly states that prior notification is required. However, this prior notification is merely a ‘principle.’ For example, if there is a risk of fleeing or hiding records, and if the tax office head acknowledges that, exceptions have been created that allow audits to be conducted without prior notification.

Over the last ten years or so, penalties have been significantly strengthened. Japan is moving in a direction that tightens restrictions, in contrast to Western countries. That’s how I feel.”

Despite having a relatively low tax burden rate compared to other developed nations, Japan is said to have a much higher sense of tax burden among its citizens than the high-burden Nordic countries. It is unacceptable for awareness of taxes and understanding of taxpayer rights to remain low.

“In Japan, lower-income individuals face a greater tax and social insurance burden. Unless citizens raise their voices against what they find unreasonable, neither the national policies nor the tax system will change.

We at the TC Forum have not given up on the realization of a Taxpayer Bill of Rights. Even with the new regulations for tax audit procedures, audits continue to be conducted without prior notification, just as before.

A rights charter is necessary to change the stance of the tax authorities toward taxpayers. This fall, we plan to once again appeal to members of the Diet’s Financial Affairs Committee and the Finance and Financial Services Committee for the establishment of the charter.”

Kyoko Hiraishi is a tax accountant and has served as the secretary-general of the TC Forum since 2013. Her publications include *A Quick Guide to the 2019 Consumption Tax Reform for Small Businesses and Sole Proprietors* and *Practical Consumption Tax for Small Companies and Sole Proprietors: Latest Edition* (both published by Japan Business Publishers), as well as *Understanding Receipts and Invoices That Can Be Written Off! Using ×* (published by Kanki Publishing).