Japanese major Konica Minolta healthcare unit ordered to pay ¥1.2 billion for evading taxes

12 May 2008

Major precision instrument maker Konica Minolta Holdings Inc. and several of its subsidiaries have been ordered by tax authorities to pay back taxes on about ¥1.8 billion in income concealed over a two-year period through March 2007.

The company was formed in 2003 by a merger between Japanese imaging firms Konica and Minolta, and reported ¥1072 billion in revenue last year. This gave it a net profit of ¥68 billion.

Additionally, the Tokyo Regional Taxation Bureau found that the company also failed to declare more than ¥200 million in undeclared income, including cases of accounting errors. Consequently, it ordered the group to pay about ¥1.2 billion in back taxes, including tax arrears and fines.

Most of the hidden income involved subsidiary Konica Minolta Healthcare Co.'s questionable leases of medical devices to hospitals. Konica Minolta Healthcare, based in Hino, western Tokyo, sells medical equipment and devices, such as X-ray scanning machines, to hospitals affiliated with Nippon Telegraph and Telephone Corp. and Japan Railway companies, as well as those run by universities and others.

The subsidiary had leased such devices for free with expectations of winning future contracts. The costs for the leased devices were passed on to other transactions, resulting in a reduction in reported income.

The tax bureau branded the practice as illicit and ordered the company to register the equipment as depreciated assets because the sales company owns the equipment.