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6 pet breeders in west Japan fail to declare $1.6 mil. in income

This unrelated photo shows a dog. (Mainichi/Toru Shirakawa)

OSAKA -- Six dog and cat breeders in Shiga Prefecture failed to declare a total of some 235 million yen (about $1.58 million) in income over the course of five years until December 2020, sources close to the case have revealed to the Mainichi Shimbun.

    The revelation came after the Osaka Regional Taxation Bureau's tax inspection on the breeders, conducted just as the pet industry enjoys booming profits due to "stay-at-home" special demand under the coronavirus pandemic. It has become rampant for breeders to conceal their income to dodge tax payments.

    Of the undeclared income, the Osaka taxation bureau recognized roughly 160 million yen (approx. $1.08 million) as concealed income. The bureau slapped the breeders with back taxes of some 78 million yen (about $526,000) including additional penalty taxes. Most of the breeders have apparently admitted to tax evasion.

    According to the sources, the taxation bureau launched an intensive investigation on breeders -- who are sole proprietors -- as suspicions grew over their tax returns amid the thriving demand for pets due to the pandemic. As a result, it emerged that the six men and women who are registered as breeders in Shiga Prefecture had failed to report their massive profits from the sales of dogs and cats at pet shops and auction houses.

    The Osaka Joint Government Building No. 3, which houses the Osaka Regional Taxation Bureau, is seen in Osaka's Chuo Ward in this October 2022 photo. (Mainichi/Ryo Numata)

    As a rule, breeders are required to report the number of dogs and cats they keep, breed and sell to the local governments they are registered with. The Osaka tax bureau's investigation uncovered malicious tactics of deliberately concealing income by underreporting those figures.

    There also emerged cases where the number of dogs and cats sold and the sale destinations could not be confirmed as the breeders did not keep trade documents. The tax bureau focused on the custom that breeders hand over pedigree certificates to clients when they sell purebred dogs and cats, and got a grasp of the total number of certificates issued by relevant organizations. The bureau then determined that the accused breeders had already sold the dogs and cats for which they no longer kept pedigree certificates. In those cases, the bureau is believed to have identified the amount of undeclared income based on the average sales price per animal.

    Amid the pandemic, more and more people are purchasing pet dogs and cats as they seek solace in them during their time spent at home. According to the Japan Pet Food Association, a Tokyo-based general incorporated foundation, the number of newly kept animals in 2020 rose by 18% to 416,000 dogs and by 16% to 460,000 cats from the previous year. The rate of increase in 2020 was the largest in the last five years, and the figure remained high in 2021.

    "Dogs in particular sold well right after the coronavirus pandemic set in, triggering a bubble," one breeder in west Japan's Kansai region confided.

    Meanwhile, an individual in the pet industry told the Mainichi Shimbun, "Breeders often have to cover the shortfalls but find it hard to take out bank loans. Many of them would have gone out of business had it not been for the pandemic. As their business suddenly became profitable, they may have resorted to the misconduct to write off their debts. Hiding income is impermissible, but there are complex circumstances."

    (Japanese original by Ryo Numata, Osaka City News Department)

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