The amount of gold bullion smuggled into Japan and seized by customs authorities in 2018 is estimated to have fallen by half from the previous year, according to sources.

More stringent penalties are believed to have contributed to the plunge.

Customs authorities and the National Tax Agency have stepped up oversight, however, as the number of smuggling cases remained high. The planned October consumption tax hike from 8 percent to 10 percent is expected to further boost profit margins for smugglers.

People who import gold must pay the tax at customs. If gold bullion is procured from overseas locations without a consumption tax, such as Hong Kong, smuggled into Japan with no tax payments, and then sold in the country at prices including the tax, the difference can be pocketed as profit by smugglers.

As trading houses that export gold by legitimate distribution routes receive consumption tax refunds, amounts equivalent to the tax end up flowing out of state coffers.

Gold smuggling surged after the consumption tax was raised from 5 percent in 2014. The number of smuggling cases detected by customs authorities in 2017 rose 60 percent from the previous year to a record 1,347 and the amount of seized gold jumped 2.2 times to about 6.2 tons, also an all-time high.

From January to September 2018, the number of smuggling cases remained high, at 1,011, while the seized amount plunged to about 1.9 tons. The annual total for 2018 is estimated at 2.5 tons, less than half of the 2017 level.

In April, the government put the revised Customs Act and other regulations into force, lifting the penalty for gold smuggling to five times the price of the smuggled metal. Smuggling of gold bullion valued at ¥100 million can be punished with a fine of up to ¥500 million.

At the same time, smuggling methods have grown more sophisticated. In addition to conventional smuggling by plane, an increasing number of cases involve international mail or smugglers disguised as foreign nationals on cruise ships.

Regulators have boosted surveillance. The Ministry of Economy, Trade and Industry, which oversees gold traders, imposed administrative punishments on six buyers in April for failing to report suspicious trading — the first action of its kind.

In July, the National Tax Agency set up teams of specialists at the three regional taxation bureaus of Tokyo, Osaka and Fukuoka. The specialists analyze consumption tax evasion by methods such as gold smuggling.

The agency is determined to conduct thorough checks for gold smuggling, which threatens public confidence in the consumption tax system, an official said.

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