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Major advertising agency Tokyu Agency Inc. failed to declare 1.03 billion yen in income for the five years to March 2001 and must pay 840 million yen in additional taxes and penalties, industry sources said Wednesday.

The Tokyo Regional Taxation Bureau found that the agency, based in Minato Ward and a group firm of the Tokyu Corp. railway, underreported its income by claiming as necessary business expenditures such outlays as wining and dining clients and taxi fares for employees working late at night, the sources said.

The 1.03 billion yen also includes unaccounted-for expenditures, they said, adding that the company is expected to pay the 840 million yen by the end of this month.

Tokyu Agency officials claimed the firm’s lax monitoring caused improper account handling and the company has since established a section to monitor expenses.

An affiliate of Tokyu Agency in charge of promoting sales paid some 50 million yen last year in back taxes and fines after authorities determined that it hid 123 million yen in income over a three-year period to March 1999.

According to the company’s Web site, Tokyu Agency posted nearly 200 billion yen in sales in the 2000 business year, which ended March 31 last year. It was established in 1961 as a Tokyu group firm.

Advertising giants Dentsu Inc. and Hakuhodo Inc. have also been found to have underreported their incomes. Dentsu failed to report 1.4 billion yen in the year to March 1998, while Hakuhodo failed to report some 600 million yen over a three-year period up to November 1998.

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