Please give us an overview of the current legal market in Japan and how any recent developments have impacted your practice?
The Japanese tax market has been modestly active for the last several years. On the controversy side, there are a small but significant number of tax assessments where the taxpayers wish to dispute the assessment and turn to tax lawyers for representation. Many of them are high-profile tax controversy cases. On the advisory and planning side, due to the recent tax law reforms implementing the Base Erosion and Profit Shifting (BEPS) Action Plan, new tax issues requiring in-depth legal analysis have significantly increased. Due to these developments, our tax practice has been consistently busy.
What significant trends exist in the tax market presently? Are you seeing these just domestically or internationally as well?
The trend seems to be that occasions where taxpayers want to dispute assessments, rather than just acquiescing to them, are increasing, regardless of whether the taxpayer is Japanese or not. Also, assessments of the matters of high-net-worth individuals seem to be increasing. Further, not only foreign
taxpayers, who are accustomed to using lawyers for tax matters, but also Japanese domestic taxpayers, who have traditionally turned to accountants for tax matters, seem to be relying upon lawyers when the matter involves complex tax law issues. Due to these trends, we see that the market for tax lawyers is promising for the future.
What are the three biggest challenges to practising tax in Japan at the moment?
One is the competition with accounting firms; when the matter relates to tax compliance, such as transfer pricing documentation, both domestic and foreign taxpayers appear to have a somewhat predetermined notion that such work is more suitable for accounting firms. Another is the lack of advance certainty and the foreseeability of tax consequences in the enforcement practice of the Japanese tax authority, as compared to other advanced jurisdictions such as the United States.
Finally, press reports by newspapers and other media outlets covering the fact that a taxpayer has been subject to an assessment due to underreporting are rather problematic, because the possibility of such coverage issued will often be a decisive factor for the taxpayer to give up disputing the arguments of the tax authority during the tax audit, even if there is a good chance of winning, since some taxpayers are concerned that such coverage may harm their reputation (i.e. to avoid bad press, the taxpayer refrains from disputing the authority’s argument).
How does tax fit into the firm as a whole? Is it easy to collaborate with other teams?
The tax practice has been an integral part of our firm’s full-service line-up since its inception. Tax lawyers with our firm not only handle tax-specific projects, such as tax controversy and tax planning, but also very frequently cooperate with our corporate, finance, real estate and dispute resolution lawyers when their projects involve tax issues and our integrated legal and tax advice is expected from clients. In that sense, it is very easy for us to cooperate with other teams (and in fact we take it for granted), in order to provide the client with a one-stop service of legal and tax advice of the utmost quality.