The Osaka Regional Taxation Bureau has concluded that Kawasaki Heavy Industries' expenses to entertain Self-Defense Force members were not tax-deductible, informed sources said Monday.
SDF submarine crew members have been wined, dined and given gift certificates and daily goods by Kawasaki Heavy's Kobe Works, which has created slush funds for entertainment purposes through fictitious transactions with submarine repair subcontractors, according to the heavy machinery maker and other sources.
Those expenses were reported as costs subject to income tax deductions. But the tax bureau has determined that they are nondeductible hospitality spending and will notify the company of its failure to declare more than ¥1 billion in taxable income over the six years through March 2023, people familiar with the matter said.
Kawasaki Heavy is also expected to face income concealment allegations, according to the sources.
The company declined to comment.
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