The opposition party, the Constitutional Democratic Party of Japan (CDP), is investigating potential tax evasion within factions of the ruling Liberal Democratic Party (LDP). The issue revolves around unreported political funds generated from excess revenue from fundraising parties.
LDP lawmakers initially reported their political organizations as recipients of these excess funds, claiming tax exemption for such non-profit entities. However, the CDP argues that the income from the factions was directly received by individual lawmakers, making it subject to personal income tax.
The CDP has highlighted revisions in political fund reports made by an LDP member once affiliated with the faction led by former Prime Minister Shinzo Abe. These revisions suggest a flow of funds from the faction to the lawmaker and then to the political organization. The CDP believes this indicates that the lawmaker received personal income and should have been taxed accordingly.
Additionally, the CDP is scrutinizing "policy activity expenses" distributed by the LDP to party executives. Opposition lawmakers contend that unspent expenses from a given year should be treated as miscellaneous income and taxed. They question the credibility of claims that such expenses were fully utilized, especially considering the substantial amounts involved.
Investigative sources have revealed that when the Abe faction distributed excess funds, faction staff advised lawmakers that reporting these sums in political fund reports was unnecessary. The CDP interprets this as an indication that lawmakers perceived the funds as personal income and used them without accountability. However, Prime Minister Fumio Kishida has stated that prosecutors have verified that the funds went to political organizations as donations from the factions.
Despite this, the National Tax Agency has emphasized that whether income is taxable is independent of what is reported in political fund reports. Tax officials are tasked with determining the source and expenditure of funds to ensure accurate tax returns. It remains unclear if these funds have been audited by tax officials.