Tax evasion behind the jackpot
Space Battleship Yamato anime movie pro
National Tax Bureau imposes additional taxes
Omitted declaration of 270 million yen
Academy Corporation Ltd., the production company that planned and produced the animated film Space Battleship Yamato, which rode the sci-fi boom to great success (President: Yoshinobu Nishizaki, Kudan-kita 1-chome, Chiyoda-ku, Tokyo) failed to declare approximately 270 million yen in copyright and other income from Yamato over the past three years.
The Tokyo Regional Taxation Bureau has issued a tax notice to the company, claiming that the company’s failure to declare income amounted to malicious concealment. On February 24, it was learned that the Tokyo Regional Taxation Bureau had assessed heavy additional taxes on the company. Academy has already filed an amended tax return, a sign that the “Invincible Battleship Yamato” has raised the white flag in the face of intense pursuit by the national tax authorities.
The Tokyo Regional Taxation Bureau received information that “Mr. Nishizaki, who made a fortune from Yamato, bought a boat and a mansion.” This information was the trigger for them to investigate tax evasion.
The Bureau first became suspicious of Nishizaki’s personal income and launched a tax investigation in the fall of last year. The investigation revealed that Mr. Nishizaki had received several hundred million in “provisional payments” from Academy, the production company he manages, which raised questions about Academy’s income reported on its corporate tax return.
Academy’s reported income for the last three years is as follows:
Approximately ¥16 million in the fiscal year ended June 30 1976.
Approximately ¥7.5 million for the fiscal year ended June 30 1977.
Approximately ¥30 million for the fiscal year ended March 31 1978.
The grand total was ¥53.5 million.
The reason for the sharp increase in the March 1978 amount is that in the summer of 1977, the Space Battleship Yamato movie planned and produced by “Academy” became a huge hit in movie theaters. Nevertheless, as a result of the tax audit, the company was found to have failed to declare a huge amount of income and to have maliciously concealed some of its income.
In December of last year, the company submitted amended tax returns to the Kojimachi Tax Office in Tokyo for the past three fiscal years. The total amount of the amended tax returns for the three fiscal years was approximately ¥7.25 million. The difference between the original return and the revised return, approximately ¥270 million, was pointed out by the national tax authorities as an omission.
More than 80% of the undeclared income was concentrated in the fiscal year ended March 1978. What is the nature of the undeclared income? The income from copyrights of animated films, mainly Space Battleship Yamato, calendar income planned and produced by the company, and gains on stock transactions.
Academy’s affiliate Sanwa Planning, which handles the company’s copyright business, recorded more than 40% of its copyright income as revenue. However, the National Tax Administration Bureau, which considered this amount to be too high, determined that the amount was approximately 30% and that the difference was unreported.
However, approximately ¥70 million of the ¥270 million in undeclared income was due to the company making fictitious payments to subsidiaries and using the off-balance-sheet money it earned to invest in stocks. The profits from these transactions were also kept off the books.
The company was assessed a heavy additional tax penalty, applicable to malicious tax evasion, on the grounds that the company had cheated on its income by fraudulent means. The total amount of additional taxes collected amounted to approximately ¥120 million, including the main corporate tax and the additional tax for underreporting.
What about Nishizaki’s personal taxable income? The taxpayer settled the case by treating the “provisional payment” from Academy as a “loan.” The company did not pursue the matter any further.
No intention of tax evasion due to difference of opinion
Kenichiro Ota, president of Sanwa Planning and vice president of Academy, said, “Until the Space Battleship Yamato series exploded in popularity, Sanwa could not survive without receiving a significant portion of the copyright income. Even after the copyright income increased, the same allocation ratio was maintained, but the tax authorities seem to have made the allocation rate an issue without considering such a process. It was just a difference of opinion, and there was no intention to evade taxes.”
Still popular with children
Space Battleship Yamato is based on the work of manga artist Leiji Matsumoto, who won the Kodansha Publishing Culture Award for his manga Otoko Oidon. It began to be broadcast on TV as a science fiction anime in 1974, and is still a popular program for children.
Yoshinobu Nishizaki took notice of this popularity and in the summer of 1977, he produced Space Battleship Yamato as a feature film. Mr. Matsumoto cooperated as director, and the film became a big hit among boys and girls.
In the summer of 1978, the second film, Farewell to Yamato, was released. For two years in a row, the film caused a boom among children on summer vacation. Not only children, but also young people and even adults stood in long lines at movie theaters to see the film.
Some critics criticized the film, saying that it would “imbue children with militarism.” But it seems that the children were instead intoxicated by the romance of the universe.
Tax “hit” on Space Battleship Yamato
Failure to declare 270 million yen
Production company Academy hid profits during a boom over three years
Academy, the production company that produced the popular science fiction video series Space Battleship Yamato (12-4, Kudan-kita 1-12, Chiyoda-ku, Tokyo; President: Yoshinobu Nishizaki; Capital: 8 million yen), failed to declare approximately 270 million yen over the past three years, according to a tax investigation by the Tokyo Regional Taxation Bureau.
On February 24, it was revealed that the company had filed amended tax returns. The undeclared income includes ¥70 million that is believed to have been used to evade taxes. The amount of additional taxes amounted to ¥120 million.
The idea of flying Yamato, a giant battleship of the Japanese Navy, in space on the screen was a hit and caused an explosive boom. However, this number one movie was sunk by the tax authorities.
A Difference in Tax Opinion
According to Kenichiro Ota, vice president of Academy and president of Sanwa Planning, “60% of the copyright income went to Sanwa, while Academy received 40%. However, the National Tax Bureau pointed out that Sanwa’s share was too large, and the company had to file an amended tax return. I think it is a matter of opinion as to which party should take more. We never did it to evade taxes.”
The Tokyo Regional Taxation Bureau also investigated the president’s income
According to the investigation by the bureau, Academy’s reported income from the fiscal year ending June 30, 1976, to the fiscal year ended June 30, 1978 was approximately ¥450 million despite a total of ¥3.23 billion in sales, a small amount compared to the amount of the boom. For this reason, the bureau waited for the financial statements for the fiscal year ending June 30, 1978 to be submitted before embarking on an investigation.
As a result, they found that Academy had established five affiliated companies and was using them as a means of “hiding profits.” One of these companies was a copyright management company called Sanwa Planning, which granted trademark rights for products related to Space Battleship Yamato. In addition, President Nishizaki also paid more than the legitimate contractual fees for the copyrights he personally owns, and treated these payments as Academy’s expenses, thereby reducing the company’s profits.
President Nishizaki also borrowed approximately ¥500 million from the company and used it to buy a yacht and build a house, but some aspects of the company’s accounting for this period were also unclear. The bureau intends to investigate President Nishizaki’s own income tax returns after the 15th of next month, which is the deadline for filing tax returns for 1978.
Space Battleship Yamato has been aired on commercial TV since October 1974, and was made into a movie in August 1977. At that time, 1.8 million viewers were mobilized nationwide. The distribution revenue alone amounted to ¥40 million.
The second film, Farewell to Yamato, was released on August 5, 1978. The advance ticket sales alone were so great that 500,000 tickets were sold, and 4 million people visited movie theaters by the end. The distribution revenue of Farewell to Yamato was more than double that of the first film, reaching ¥2.13 billion.
Against the backdrop of this boom, Academy alone released 150 related products, including the theme song, picture postcards, posters, towels, and a luxury book that cost 30,000 yen. The film was also exported to the United States and Southeast Asia as a TV and movie production. It is popular among children overseas as Space Cruiser Yamato.
The Response, April 1979
Yoshinobu Nishizaki thought the tax issue serious enough to issue a comment to the official Yamato fan club. It came in the form of a leaflet in club magazine Vol. 9 (April 25) and read as follows:
Dear Yamato fans
The other day (February 25), a nationwide news report appeared in newspapers, TV and radio reports regarding Academy Corporation’s “failure to file tax returns.” I would like to express my sincere appreciation to all Yamato fans for your concern. As the general manager of the Academy group, I sincerely apologize for the inconvenience.
However, there is a discrepancy between the news report and the facts, which is based on a difference of opinion. When I started planning the Space Battleship Yamato movie, I decided to put all my other business aside in order to concentrate on my work as a producer. That is still the case today. Therefore, I am not the president of Academy Corporation. The financial and tax affairs of Academy are handled by Mr. Kenichiro Ota, who is the representative director of Academy. Even now, I still trust him with all my heart.
On the day I returned from America (Feb. 25) where I was working on the U.S. broadcast of Space Battleship Yamato, I was surprised to see the newspapers and immediately investigated. As a result, the issue should not be described by the term “tax evasion.” Technically speaking, it was an “amended return,” and the matter had already been resolved as of December of last year.
Despite the difference of opinion, I feel deeply responsible for the misunderstanding that resulted in the large tax correction. However, I believe that the “true image” of a producer is in their work. If it were false, it would not have been accepted by everyone. The works I produce give me a place to talk about what I think and feel.
Currently, I am working on a “Yamato telefeature,” which is scheduled to air this July, and a theatrical film to be released next spring. I look forward to seeing you through these works. I would also like to thank the many fans who have called and written to me with encouragement.
Space Battleship Yamato Producer
Yoshinobu Nishizaki