DaimlerChrysler (Japan) has been forced to pay an extra 5bn yen ($45.87m) in tax after failing to declare profits totalling 15bn yen -between 1995 and 1996 – to Japanese authorities, writes the UK’s Financial Times (5/10/00).
According to the newspaper, payment was demanded once the Tokyo Regional Taxation Bureau discovered DaimlerChrysler (Japan) had transferred profits to Germany – profits that should have been taxed in Japan.
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In a statement issued by the company (5/10/00), any wrongdoing was strongly denied with DaimlerChrysler saying that any claim that the company was avoiding tax payments was completely false.
The company stressed that it had not been penalised, as the extra 5bn yen was a repayment of back taxes and not a fine so no laws had been broken, reports the FT.
During the years in question, the company benefited in a shift in the exchange rate between the Deutsche Mark and the Yen, which resulted in abnormally high profit.
As part of a transfer-pricing programme – which involves parent companies overcharging subsidiaries in countries where the effective tax rate is high so allowing companies to book earnings in a low-tax nation – the company then transferred 15bn yen to Germany, writes the newspaper.
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