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Be wary of your investments -- the TAXMAN is watching

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  • Originally posted by TJrandom View Post
    With bank interest rates at miniscule rates - safety from physical theft of cash seems to be the only thing that a J bank provides.

    Fair enough, but surely a tad better than going off to work every day leaving your empty house with 20 million savings stashed somewhere inside.

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    • Originally posted by Keeptrying View Post
      Fair enough, but surely a tad better than going off to work every day leaving your empty house with 20 million savings stashed somewhere inside.
      Yes - I agree with that, but for a person who pays no tax on his hoardings, and no national pension, etc. - there must be a risk-reward payoff at some point for hiding your cash as I understand that quite a few do so.

      My guess is that he has a safe hidden in the garden under a wood pile or trash can, etc. Safe from fire – but at risk if he is held at knife point, or if someone somehow sees him access it.

      Comment


      • Originally posted by SantaKraut View Post
        Get international money order, under $3,000 pay cash for it and send it home.

        This sounds interesting, but can anyone clarify:

        1. Is it better to get this from a bank or post office. I recall reading somewhere that the PO is less troublesome?

        2. Can the MO be open (no name) or should it be to a named friend/relative and is there a difference? Also, what about tax implications to the receiver when they cash it in and transfer to your account?

        3. You have to fill in a form when buying an international MO, so isn't that a tax paper trail that defeats the object if you do this more than a few times, making it pretty obvious to prying eyes what you're doing?

        4. If the MO gets lost in the mail, even if Registered/EMS, doesn't that introduce a risk when sending thousands $$$ abroad?

        Comment


        • Originally posted by TJrandom View Post
          Yes - I agree with that, but for a person who pays no tax on his hoardings, and no national pension, etc. - there must be a risk-reward payoff at some point for hiding your cash as I understand that quite a few do so.

          My guess is that he has a safe hidden in the garden under a wood pile or trash can, etc. Safe from fire – but at risk if he is held at knife point, or if someone somehow sees him access it.
          Maybe, maybe not. Where does it pay off:

          1. When investments pay low rates of return or are too risky for the investor.
          2. The person is older or will need to spend the cash in the short to medium term.

          Here is an example where it wouldn't pay off:

          Lets say the person has $20,000,000 yen and they are 30 years old. The economy is doing well and GIC's are paying 8% and the stock market is returning 12% per year. The person is still earning a lot more than they spend so will not need to dip into this money in the foreseeable future, maybe not until retirement, and is continually adding substantial amounts to their saving. Making 0% on that money for 30 years is not worth the tax savings created.

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          • Originally posted by thewileycoyote View Post
            Maybe, maybe not. Where does it pay off:

            1. When investments pay low rates of return or are too risky for the investor.
            2. The person is older or will need to spend the cash in the short to medium term.

            Here is an example where it wouldn't pay off:

            Lets say the person has $20,000,000 yen and they are 30 years old. The economy is doing well and GIC's are paying 8% and the stock market is returning 12% per year. The person is still earning a lot more than they spend so will not need to dip into this money in the foreseeable future, maybe not until retirement, and is continually adding substantial amounts to their saving. Making 0% on that money for 30 years is not worth the tax savings created.
            Yes - but for some, what you have described is indeed "too risky for the investor". Doesn't trust banks, doesn't understand the market, knows that buying stocks is pure gambling (investing in stocks assumes knowledge), knows that real estate is still going down, PLUS he has a history of tax evasion and doesn't want to risk all of the penalties he would NOW have to pay. So he stays with what he knows - cash, a little gold, and hope that all will be well and he won’t be found out.

            Comment


            • Originally posted by TJrandom View Post
              Yes - but for some, what you have described is indeed "too risky for the investor". Doesn't trust banks, doesn't understand the market, knows that buying stocks is pure gambling (investing in stocks assumes knowledge), knows that real estate is still going down, PLUS he has a history of tax evasion and doesn't want to risk all of the penalties he would NOW have to pay. So he stays with what he knows - cash, a little gold, and hope that all will be well and he won’t be found out.
              Just because someone does something doesn't mean the risk-reward payoff is in their favour. Many people are financially illiterate, that includes higher income earners and a lot of front line bank employees. People also tend to look at the short term benefit and neglect the long-term rewards. Of course, in todays environment I think the risk-reward ratio in is favour of hoarding cash. The reason I answered as I did is because you stated:

              Originally posted by TJrandom View Post
              there must be a risk-reward payoff at some point for hiding your cash as I understand that quite a few do so.
              I was referring to this general statement, not to any one situation. The tax evasion situation you mention of course changes the situation, as many other factors would, such as hyper-inflation or an impending divorce.

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              • Originally posted by thewileycoyote View Post
                .... The reason I answered as I did is because ....
                No worries - I agree with your main points...

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                • Originally posted by thewileycoyote View Post
                  While this is not Japan this shows that governments around the world are getting more serious about tax cheats and are actually becoming proactive in finding them.

                  Switzerland agreed to process a request for account information of 4450 US citizens.

                  http://www.swissinfo.ch/eng/politics...tml?cid=684242

                  Don't make enough, but know a really rich tax cheat? Let him fund your retirement.

                  Read about halfway down the first article.

                  http://www.vitrolenta.com/finance/ta...-response.html

                  Germans buying stolen data.

                  http://www.smh.com.au/world/merkel-h...0203-ndmj.html

                  Belong to an Italian Yacht Club?

                  http://www.businessweek.com/magazine...4010879756.htm

                  In first world countries government revenues are going down (high unemployment) and their expenses are going up (boomers getting old and retiring). In the future it's going to become increasing harder to hide your income if you are a low/non paying higher income earner, especially if you live at your income level.
                  All true. We need to reinforce, however, that one big reason that tax agencies are becoming "proactive" is that many governments have seriously messed up. I paid millions. I wish I could have directed those taxes.

                  To digress, this year more and more people want to become teachers and civil servants so as to have a secure job. Therefore it would appear that they haven't gotten the message that the civil service is going to be shrunk because, to date, no such direct message has been announced! It's one example of the egregious mismanagement of public funds.

                  Comment


                  • Originally posted by Super Grover View Post
                    ... they haven't gotten the message that the civil service is going to be shrunk ...
                    I am not so sure on that - in this communistic country, keeping the public servants, farmers, construction workers, toll gate operators, fishermen, etc. employed, even if they have little to do - keeps the politicians in office. Time for the salary man to rise up for a tea-party like uprising, but that isn't likely to happen.

                    Comment


                    • SG,

                      If you'd come clean before they got to you, do you think they would have been more lenient? Or you reckon they would have rogered you just as forcefully?

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                      • Originally posted by PUNCHtoTHEguts View Post
                        SG,

                        If you'd come clean before they got to you, do you think they would have been more lenient? Or you reckon they would have rogered you just as forcefully?
                        It was not a case of "coming clean." I did not deliberately hide anything or intend to deceive. I believed I was doing everything correctly. I paid tax in Canada. As I have written near the start of the thread, they were on a mission. Majestic pointed out that tax treaties do not necessarily guarantee that it is a zero sum scenario. That was the case. Then I was forced to pay enormous penalties. I think they deliberately were waiting to collect more.

                        To answer you, though, NO. They are robots. They were polite. They told me, as I have written, that they will audit me again for 2010.
                        I wish I could find out definitively whether income from investments earned outside Japan can only be taxed as salary as I was my case. Every penny abroad as salary?? I have until March 15 to try to save myself if I can be saved. Not ranting or complaining.
                        Last edited by Super Grover; 2011-02-09, 09:12 AM. Reason: repair sh!tty typing

                        Comment


                        • Originally posted by PUNCHtoTHEguts View Post
                          SG,

                          If you'd come clean before they got to you, do you think they would have been more lenient? Or you reckon they would have rogered you just as forcefully?
                          They would have done him whether he came clean or not. Examples must be set. And we make excellent examples.

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                          • Originally posted by Super Grover View Post

                            Anyone have any ideas for reducing tax and still investing????
                            Not on this tread.

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                            • Originally posted by Super Grover View Post
                              It was not a case of "coming clean." I did not deliberately hide anything or intend to deceive.

                              SG,

                              Sorry, didn't mean to imply you were doing so.

                              Just wondering if they would be more lenient and apply less penalties if you get to them before they get to you. Obviously it was too late in your case.

                              Majestic, the tax whiz, you know the answer to this?


                              I'm guessing there is a simple answer... Get a good accountant!

                              Comment


                              • Hello SG, Punch,

                                Sorry SG, I don't know of any Japanese brokers who trade on the Toronto exchange. In general though, if you trade by yourself (through etrade or whatever) on foreign exchanges, there is only demerit - from a Japanese tax point of view. But as I mentioned elsewhere, the demerits of the tax treatment are probably not so heavy that they will negate the merits of the investment gain. Even a relatively modest gain on an overseas transaction will yield you higher post-tax returns than parking your money in a Japanese savings account. Of course, if you make a loss then all bets are off, but only you know how much risk you are willing to stomach.

                                Regarding the deductibility of accountant's fees; it depends on the type of income (apparently). Accountant's fees do not seem to be deductible as an expense when calculating "miscellaneous income". However, they are deductible against income generated from real estate income. (I found the following two items helpful
                                http://oshiete.goo.ne.jp/plus/q/63500/
                                http://www.nta.go.jp/shiraberu/zeiho...toku/04/11.htm )

                                Punch, if you notice an error or an omission in your taxes, its always better to let the taxman know rather than to keep quiet and hope he doesn't find out. In SG's case, even though there was no intent to defraud, the tax office was still within its authority to impose a late penalty in addition to imposing interest on any underpaid amounts. If you notice an error and make the necessary amended tax returns, the late penalty will generally be waived (but not the interest on the underreported amount).
                                Last edited by Majestic; 2011-02-09, 02:32 PM.

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