With the consumption tax set to rise next April, the prospect of default on Japan’s huge national debt, and the still-unresolved issue of radiation emanating from Fukushima, maybe it’s time to get out of Japan. Increasing numbers of financially well-off Japanese, reports Nikkan Gendai (Oct 30), have been doing just that, heading for Singapore, Malaysia and other safe havens along with sufficient funds to support them in the manner in which they are accustomed.
But hold on a minute. According to a certain accounting office in Tokyo, more of these moneyed expatriates have tried living abroad and are now saying they want to return to Japan.
“A common pattern I’ve been seeing is that these people moved abroad so that their children could avoid paying Japan’s high inheritance taxes,” says the unnamed accountant. “According to Japan’s current law, if the recipient of inheritance has lived abroad for five years or longer, or if he or she becomes a citizen of a foreign country, the highest rate they can be charged in inheritance taxes is 50%.”
As opposed to Japan’s highest income tax rate of 50% (including local resident’s tax), the maximum tax in Singapore is 20%, with no additional taxes. So if large sums of money are involved, it might appear on the surface that moving abroad would make sense. But this is due to an incomplete understanding of global finance.
“The most intolerable thing about Japan’s national taxes is the stringency with which assets are tracked,” says Mr A, who previously worked as a securities trader in Singapore before returning home to Japan.
“If, for example, you remit more than 1 million yen abroad, the tax office must be notified. If you try sneaking the money out by less than fully legal means, there’s a strong chance the tax office will go after you. Even if you open an account in some offshore tax haven, since it is ultimately subject to Japanese taxes, I don’t get the feeling there are many merits to this kind of capital flight.”
In addition, Singapore is hot all year around, and many Japanese, accustomed as they are to the changing weather patterns and variety of seasonal foods, will find it difficult to get used to.
Mr A also notes that after Tokyo won its bid to host the 2020 Olympics, more people’s patriotic spirit have been rekindled and they’re suddenly looking at their homeland in a different light.
Mr B, the former owner of an IT business, finds that life overseas offers no assurance of an escape from price increases.
“Apartment rents have been soaring in Singapore and Hong Kong, at the annual rate of 10 to 20%,” he says. “What’s more, in Singapore a condominium can cost about double the price of Japan. To put a cap on rising prices the Singapore government raised the tax non-citizens pay on real estate purchases from 10% to 15%. Also, tuition at international schools can run about 2 million yen per year. These prices have also been increasing at the rate of 5% to 15% per year.”
Costs for medical care are also prohibitive, and a serious illness carries with it high financial risk.
“What’s more, when foreign permanent residents in Singapore reach the age of 17, they become subject to compulsory military service,” Mr B adds.
So then, asks Nikkan Gendai, does reading this make you want to return to Japan? True, leaving might offer short-term benefits; but now more than ever it’s the time to think things through carefully.