Tax authorities have determined Sumitomo Light Metal Industries Ltd. gave more than 1 billion yen in undeclared donations to deficit-ridden subsidiaries over a four-year period through March 31, 2005, sources said Tuesday.
The Tokyo-based aluminum and copper smelter has also been accused of failing to declare several hundred million yen in expenses for smelting facility repairs and personnel costs at its overseas subsidiaries, the sources said.
The total amount on which the firm was evading tax in the four-year period was 1.5 billion yen, including the 1 billion yen donation, while it booked 1.1 billion yen in new expenses. Sumitomo Light Metal belatedly paid the 1.1 billion yen to separate subsidiaries as costs for packaging services.
The National Tax Agency determined Sumitomo Light Metal failed to declare the balance of 400 million yen in income and imposed 250 million yen in back taxes, including penalties, the sources said.
Sumitomo Light Metal said it has a different opinion about the taxes owed but will pay the back taxes to save the time and cost of a legal battle.
The sources said Sumitomo Light Metal had sold aluminum ingots to subsidiaries at prices far below market price. Among the subsidiaries was Nippon-Alumi Corp., an aluminum-processor based in Osaka.
The agency said Sumitomo Light Metal's practice amounted to financial assistance to the subsidiaries, and the difference between the market and sales prices was a donation that should be taxed.
Nippon-Alumi posted net losses in 2002 and 2003. In 2004 it posted 100 million yen in profits. Without the donation from Sumitomo Light Metal, Nippon-Alumi might have stayed in the red, the sources said.
Sumitomo Light Metal, founded in 1897 in Osaka, employs about 2,300 people and has 60 subsidiaries and related firms.