Why your apartment block has a vending machine

[Mulboyne]

Yomiuri: Landlords coin it with vending-machine tax ruse
Landlords across the nation are raking in an estimated total of 9 billion yen a year in consumption tax refunds by exploiting a loophole in the Consumption Tax Law, according to the Board of Audit. By setting up a single soft-drink vending machine, landlords are able to receive refunds for taxes paid when their apartments and condominiums were built. The practice is rife across the nation, the board said. The board has decided to ask the Finance Ministry to take steps to solve the problem. The board points out that the loophole in the law undermines the fairness of the tax system and intends to include its request for improvements in an auditing report on the government's account settlement to be submitted to Prime Minister Yukio Hatoyama in November.

Landlords receive most of their income in rent from tenants. However, rent is not subject to consumption tax, so the consumption tax paid by owners in constructing their buildings is not refunded. In principle, consumption tax is paid by the end consumer. Article 30 of the Consumption Tax Law stipulates that if 95 percent of the revenues, or above, of an individual or organization is subject to consumption tax, the consumption tax they paid for stocking or other purposes will be refunded. In a case in which a landlord's revenue is entirely made up of rent, none of this income is subject to consumption tax. In such a case, a landlord cannot receive a consumption tax refund.

However, the real estate industry has created a revenue stream that is subject to taxation through the use of vending machines. As sales of soft drinks are subject to consumption tax, if landlords report vending machine revenues to the taxation office at a time when they have not yet received any rent money from tenants in their new buildings, 95 percent or more of their revenue will be subject to consumption tax, and the consumption tax paid associated with building the apartment or condominium will be subject to tax refunds.

For example, for a landlord who paid 210 million yen, including tax, to construct a condominium, 10 million yen would be refunded by using this method. The board randomly selected more than 40 of the nation's about 520 tax offices to investigate consumption tax refunds paid to landlords in fiscal 2006. It discovered that the vending machine technique was used in about 120 cases in which owners received 800 million yen in consumption tax refunds. It estimates that a total of 9 billion yen was refunded to landlords as a result of this method.

[dimwit]

Damn. I thought that broken vending machine around the corner was there to enhance the scenic beauty of the nieghborhood.