Steelmaker NKK Corp., now known as JFE Engineering Corp., hid some 300 million yen in earnings in the five years to the end of March 2001, sources said Monday.

The Tokyo Regional Taxation Bureau ordered the company to pay 400 million yen in unpaid taxes and punitive surcharges, the sources said.

In addition, the tax bureau determined that the firm failed to declare another 700 million yen in taxable income due to accounting errors, bringing the total amount of untaxed income to more than 1 billion yen, the sources said.

A JFE Engineering official said, “During routine tax investigations for fiscal 2001, we were told that we failed to report earnings, including for the previous period, due to differences in understanding and other reasons. We accepted the penalties and have already paid them.”

According to the sources, NKK won a contract in 1998 to build a waste incineration plant for the Osaka Municipal Government’s Environmental Management Bureau for some 30 billion yen and wrote off as general expenditures the 300 million yen incurred in “local measure costs.”

But the tax bureau, which is under the National Tax Agency, determined that the money should have been declared as taxable expense-account spending and that the company had thus concealed income.

“Regarding the expenses concerning the waste incinerator in Osaka’s Hirano (Ward), there were parts that were not acknowledged (as expenses) due to differences in opinions with the Tokyo tax bureau, but it was not a disguise for concealment,” the JFE official said.

In a related case, the Osaka District Public Prosecutor’s Office arrested a manager in the government’s Environmental Management Bureau in June in connection with suspected bribery involving another firm over the project to construct the Hirano waste incinerator.

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