Matsushita Granted Advance Tax Deal by U.S. IRS
TOKYO (AP) _ A giant Japanese electronics company on Tuesday announced an agreement with the U.S. Internal Revenue Service to head off disputes over whether it is over-reporting costs to evade American taxes.
Other Japanese companies are expected to follow suit, amid expectations in Japan that President-elect Bill Clinton will impose tougher tax requirements on U.S. subsidiaries of Japanese companies.
Japanese press reports said giant Matsushita Electric Industrial Co. paid a $4.8 million tax supplement in response to IRS charges that the company had set prices of video recorders imported by its subsidiary too high in an attempt to evade U.S. corporate taxes.
Under the Advance Pricing Agreement, which took effect in March 1991, the IRS can assess corporate data to decide appropriate prices for parts and products imported by U.S. subsidiaries. Once such prices are decided, it cannot raise any dispute over them to seek additional tax payments.
Akira Nagano, a Matsushita spokesman, said the company believed avoiding future tax disputes was worth compromising some classified data on prices.
The IRS and Japan’s National Tax Agency agreed to grant Matsushita the new taxation formula in August, two years after Matsushita Electric Corp. of America, Matsushita’s New Jersey-based subsidiary, applied, Nagano said.
″With the agreement, we believe the risk of getting double taxation can be eliminated in the future,″ Matsushita said in a statement.
Nagano said Matsushita exports audio-visual and office equipment from Japan to its U.S. subsidiary. The agreement covers products shipped between April 1, 1991, and March 31, 1992.
Japan’s Federation of Economic Organizations said three of the 328 companies responding to a survey last December were preparing to apply for the agreement and 71 others were considering it.
In the same survey, 47 companies said they have had tax disputes with the IRS in the last five years, and 107 others said they were worried about possible disputes in the future.