Crime Duty-free fraud on the rise amid Japan's tourism boom

A significant loophole in Japan's duty-free system has been revealed recently: nine individuals were found to have exploited the system by purchasing over 100 million JPY worth of duty-free goods and reselling them domestically for profit rather than exporting them as required.

In fiscal 2022, these individuals collectively purchased 3.4 billion JPY of goods, evading approximately 340 million JPY in consumption taxes. Duty-free goods are intended for export and cannot be resold within Japan. Customs officials collect the 10% consumption tax from individuals who fail to export these goods. Previously, customs officials could only levy these taxes through written notices, a time-consuming process. To address this issue, the law was amended in April 2022 to allow for verbal notices, particularly for individuals attempting to evade taxes by arriving at the airport just before boarding their flights.

However, customs officials at Narita and Haneda airports failed to verbally levy taxes on the nine individuals. The board found that this oversight was caused by a misunderstanding of the revised law among Finance Ministry officials. This led to providing incorrect guidance to customs staff. In a separate finding, the board revealed that customs officials levied consumption taxes in 367 cases in fiscal 2022 due to suspicious circumstances. This includes departing travelers not possessing the duty-free goods they previously purchased.

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Many countries have implemented a refund system to combat the illegal resale of duty-free goods. This system allows foreign visitors to claim a refund on the consumption tax paid on their purchases by presenting them at customs upon departure. Japan is now exploring the possibility of adopting a similar system.