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OSAKA — Tax authorities have determined that farm machinery maker Kubota Corp. disguised 450 million yen as legitimate expenses, including some 100 million yen in illegal payoffs to “sokaiya” corporate extortionists, over the past several years, industry sources said Monday.

The Osaka Regional Taxation Bureau has ordered the company to pay 240 million yen in tax and penalties.

It said the falsely claimed expenses form part of some 560 million yen in income the Osaka-based firm failed to declare in tax returns over seven years through March 2000, the sources said.

Kubota’s payoffs to sokaiya, who target companies, came to light last year, when two racketeers and a former Kubota executive were convicted. The executive gave 86 million yen to the two racketeers to ensure they would not disrupt the firm’s annual shareholders’ meetings, a court ruled.

According to the sources, Kubota paid some 30 million yen annually to an advertising agency that was a front for the racketeers, allegedly for billboard ads. It claimed the payoffs as deductible expenses. The ad agency earned more than 100 million yen over the seven years by subcontracting the maintenance of Kubota’s billboard ads.

The tax bureau determined that the money earned by the ad agency was actually a payment by Kubota to the racketeers and should be taxable, the sources said.

The tax authorities also rejected Kubota’s claim that the more than 300 million yen it paid to local residents as compensation for the building of a factory should be included in the construction cost. The authorities ruled the payment was a scheme intended to reduce the firm’s declared income, the sources said.

Kubota officials admitted the company has been probed by tax authorities but said the firm disagrees with their interpretation of the nature of the money in question.

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