Thursday, May 23, 2013

The Courts Try Reason

In most industrialized democracies, the above title is something of a non sequitur. However, in this blessed land, where the courts have long shown deference to the executive and legislative branches, the sudden irruption of reasonable and reasoned decisions against the government is a surprise -- and a cause for celebration.

Last year Philip Brasor and Masako Tsukubu posted on their Yen for Living blog about the case of a former Osaka salaryman and father of two small children. The man had found a way to beat the odds, putting together a program that, when applied in a brute force manner, could net a tiny profit out of betting on horse races. Relying on databases of race results, the man placed massive, repetitive, automated bets on multiple horses, resulting with each iteration in a tiny, but compounding, return.

After letting his computer run these bets for three years, the man learned, to his horror, that under existing interpretations of tax law, his tax bill would be calculated not based upon his net winnings but upon the blunt, arithmetic total of his gross winnings, minus the cost of the winning tickets. This meant that when the dust cleared the man owed the National Tax Bureau 570 million yen in back taxes on transactions that had netted him only 140 million yen in income. (Link)

The man filed suit for relief from the Osaka District Court, arguing that the tax office's method of calculating income was insane.

Incredibly, at least for those of us who have been around these parts for a while, Osaka District Court Justice Nishida Masaki this morning handed down a judment in the man's favor (Link - J). He released the man from the immense tax penalty he had incurred, ordering him to pay taxes only upon the amount he had actually earned from his successful, fractional trading betting strategy.

Justice Nishida is of the 34th graduating class of lawyers, so he is near, if not exactly on the cusp of, retirement.


So for those looking for the story of Japan being saved despite itself, perhaps talking with hot young entrepreneurial types or reformist politicians and bureaucrats is a misleading waste of time. Perhaps the real vanguard of change for the better is a posse of old guys and gals in long black robes.

1 comment:

Maxamillian said...

Just wanted to comment to say that even though it's been a couple of years since I did any blogging myself, and even longer since I came back from Japan, I still read your blog every day. It remains the best presentation and commentary on Japanese news I've come across. Best wishes from London!