The main opposition Constitutional Democratic Party of Japan (CDP) is focusing on potential tax evasion involving unreported political funds within factions of the ruling Liberal Democratic Party (LDP). These funds, primarily derived from excess amounts obtained through sales of tickets to fund-raising parties, were returned to the lawmakers who sold them.
The crux of the issue lies in identifying the recipient of these excess funds. Many LDP lawmakers, upon revising their political fund reports, claimed that their political organizations received the "income" from their factions. As a result, the funds would be exempt from taxation due to the nonprofit status of such organizations.
However, CDP lawmakers assert that the LDP members directly received the income from their factions. This classification would make the money taxable as personal income.
At a recent Lower House Budget Committee session, CDP policy chief Akira Nagatsuma presented evidence suggesting that the money flowed from the Abe faction to a lawmaker, who then donated it to his political organization. This document raised questions about potential personal income tax liability.
Furthermore, the CDP is examining "policy activity expenses" distributed by the LDP to party executives. Under current law, lawmakers are not required to disclose how these expenses are used. The CDP argues that any leftover expenses should be considered miscellaneous income and subject to taxation.
The case of Toshihiro Nikai, the former LDP secretary-general, exemplifies this issue. Nikai received a total of 4.8 billion yen in policy activity expenses during his five-year tenure. The CDP calculated that this amount would require Nikai to spend 100,000 yen every hour of the day to exhaust the funds, raising questions about the actual usage and potential leftover expenses.
According to investigative sources, when the Abe faction distributed the excess money back to the lawmakers, faction staff members advised that the sums need not be listed in political fund reports. This explanation implied that the lawmakers could use the money as they pleased. If that was the case, the funds should be considered personal income.
Prime Minister Fumio Kishida stated that prosecutors had investigated the funds accumulated through fund-raising parties and confirmed that the cash went to political organizations as donations from the factions. However, a high-ranking official of the National Tax Agency emphasized that whether income should be taxed is separate from what is included in political fund reports. The official stressed the importance of clarifying the source and usage of funds to ensure appropriate tax compliance.