Tokuryu Exploits System: Chinese Duty-Free Resale Group Tactics Unveiled
Daikokuya, a major used goods retailer, also suffered a 200 million yen loss.
Due to the activities of resellers, Daikokuya, which faced additional tax charges, has stores prominently displaying duty-free.Chinese duty-free goods resale group abusing the consumption tax exemption system
Near the west exit of Shinjuku Station, a white van with a Saitama Prefecture Kawaguchi number plate was parked on the street. An around-40s woman, holding a paper bag from a second-hand luxury brand store, approached the van while looking around cautiously. She handed the bag to the man sitting inside the van and, in return, received cash.
The woman checked the four 10,000 yen bills and seven 1,000 yen bills twice, like dealing playing cards, before tucking the money into her bag and quickly leaving the scene (refer to photos 3-5). Moments later, a man in his 20s, holding a paper bag from an electronics store, approached the van. Like the woman, he handed the bag to the man and received cash before leaving.
They were part of a Chinese duty-free product resale group that abuses Japan’s consumption tax exemption system. The scene witnessed by the author, who published “Resellers: The Dark Economics” (Shincho Shinsho) on November 18, was one of their procurement operations.
The duty-free system exempts consumption tax on items purchased by non-resident foreigners (such as tourists and Japanese returnees). However, purchases for resale or domestic use are excluded from the exemption.
Under the current system, there is no check to confirm whether duty-free goods purchased by individuals are actually taken out of the country by the buyer. Exploiting this loophole, the group uses the names of visitors to Japan to purchase items duty-free, thereby obtaining goods for resale at a 10% discount due to the consumption tax exemption.
As a result of the resellers’ activities, many cases have emerged where the selling parties are held responsible. In April of this year, the Tokyo National Tax Agency imposed a 230 million yen back tax on Daikokuya, a major second-hand goods buyer and seller, for repeatedly conducting duty-free sales to customers suspected of reselling.
The Japanese government is not merely standing by. Recognizing the widespread fraud, the outline for the 2024 tax reforms includes a shift to a refund-type duty-free system, where tax refunds would be issued after confirming that the goods have been taken out of the country during departure, instead of selling duty-free items at stores.
However, the resale groups are also quick to act. With the switch to the refund-type system expected as early as the next fiscal year, they are rushing to bulk-buy duty-free items in the meantime.
