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Japan Orders Sony to Pay Back Taxes

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July 5, 2006 – On Friday, the Japanese government ordered Sony, Inc. to pay back taxes of approximately 27.9 billion yen ($244 million USD), according The Japan Times. Sony is accused of evading income taxes related to U.S. operations and their game division.

Taking a hard line on tax evasion, the Tokyo Regional Taxation Bureau gave a back-tax bill to Sony, along with companies Mazda Motor Corp. and Mitsui & Co. and Mitsubishi Corp. The back-tax bill orders payment of income taxes from international business, in accordance with a 2003 U.S. agreement that prevents a parent company reporting earnings under a subsidiary in another country.

For the fiscal 2005 year, Sony reported that the company’s income before taxes totaled 286.3 billion yen ($2.45 billion USD) and its net income was 123.6 billion yen ($1.1 billion USD), according to Sony’s consolidated earnings reports.

Sony intends to protest the back-tax bill, claiming the order is double taxation, according to The Wall Street Journal.

Sony also announced the appointment of a temporary external auditor for "Japanese law purposes," said a Monday Sony press release. By order of the Financial Services Agency, Sony suspended the auditing firm ChuoAoyama PricewaterhouseCoopers from July 3 to Aug. 31, 2006. The new auditor is PricewaterhouseCoopers Aarata.

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