Hokuto fails to declare ¥1 billion

JIJI

Top mushroom producer Hokuto Corp. failed to declare nearly ¥1 billion in taxable income for the five years through March 2011, it was learned Tuesday.

Hokuto corrected the declarations and paid nearly ¥300 million in back taxes, including penalties, in December, sources said.

At issue were massive loans to a U.S. subsidiary. The Kanto-Shinetsu Regional Taxation Bureau reportedly determined interest rates were set at unfairly low levels and that part of the parent’s income was transferred to the unit under the preferential treatment.

According to Hokuto, it set up the wholly owned California subsidiary in July 2006 for production and sales. The company has extended loans to the unit for assistance, with their balance expanding to ¥5.6 billion as of the end of March 2011.

The tax authorities are believed to have maintained that the interest rates on the loans were lower than those that the unit might have paid if it raised funds locally.

They have also told Hokuto that it had incorrectly reported the timing of advertising spending, according to the company.

Hokuto said the company had differences of opinion but that it accepted the authorities’ instructions and revised the interest rates.

Established in 1964, Hokuto produces mushrooms in the U.S. and Taiwan as well as in Japan. It posted group sales of ¥51.5 billion in the business year to last March.