Tax authorities have discovered that the Postal Services Agency failed to collect taxes on about 3.5 billion yen in interest in 2000, sources said Friday.

The authorities pointed out that the government-affiliated agency did not collect taxes from some depositors abusing tax-free deposit plans for people aged 65 or older, the sources said.

Some depositors, who split their money into different accounts so they would not exceed the tax-free limit of 3.5 million yen per account, were not taxed even though the agency is required to collect taxes if the money deposited under the same name exceeds that limit.

In some cases, the agency also allowed depositors under age 65 to use a tax-free account, the sources said.

In an attempt to encourage clients to put money in postal savings, some post office workers even "advised" potential depositors to abuse the system by assuring them that tax authorities would not investigate postal savings, the sources said.

Post office workers were found to have been involved in the scam at some 20 post offices nationwide, with the amount of unpaid taxes reaching about 200 million yen.

The practice was exposed by an investigation by the National Tax Administration Agency, which began a nationwide probe after uncovering tax collection problems at the postal agency's unit in Kyoto last year.

The tax authorities have imposed around 5 billion yen in back taxes on the agency and requested that it fully comply with the law at post offices nationwide, the sources said.

The postal agency plans to pay the taxes and ask depositors who have not paid the due taxes to shoulder the burden.