JB – I am an American and grew up in the Midwest in Kansas. I went to undergraduate school at Kansas State and law school at the University of Virginia. After law school, I chose to join PwC’s international tax practice primarily because I was interested in international business and was posted in San Francisco. While at PwC, I had a desire to take one of the overseas tours occasionally offered to US tax professionals. The US tax practice of PwC has a sprinkling of US tax professionals stationed around the world in such locations as London, Paris, Moscow, Hong Kong, Singapore, Beijing, Shanghai etc. Japan came up as a potential posting and I jumped at the opportunity even though I did not speak any Japanese at the time!

KJ- You have the experience of devloping your tax career in two seperate countires. What have you learned?

JB- While in the process of changing, Japan is a very different sort of place to be a tax professional. What I mean by this is that generally speaking Japanese culture does not encourage tax planning. From a traditional Japanese standpoint, tax planning in Japan is perceived as somewhat unseemly. The general perception is that it is something like stealing from the greater community and why would anyone want to do that? In Japan, the business culture is that if you are making money it is your privilege to pay taxes. I have had executives boast that they are the largest taxpayer in their district and that they are proud of it. As a western tax professional, this attitude takes some getting used to! From a western perspective, tax planning is perceived as a positive thing as the tax professional is helping the company save money.

KJ – What advice do you give foreign tax professionals when they come to Japan?

JB - I often advise Western tax professionals when they come to Japan to avoid falling into a trap where just because the place looks very Western that they assume that the legal and tax system operates in the same way as the West. While on the surface the system looks similar, the system works very differently under the surface and they need to be aware of these differences or they will get themselves into trouble. If you attend law school in the US, one of the first topics you discuss is the concept of “rule of man” versus “rule of law”. The US is very much a “rule of law” place which means that even the ruler is bound by the rules. On the surface, Japan is also a rule of law country. It has a parliament, a prime minister, a constitution, a court system, etc. However, underneath this veneer there are a lot of unwritten social and other rules which can trump the written rules. Further, government officials have a great deal of discretion which to some degree makes Japan more of a “rule of man” country.

KJ- How do these differences affect your tax practice?

JB - In Japan, the technical answer to a tax question is often not the most important issue. What may be the most important issue is whether you have a reasonable non-tax reason as to why you did what you did. In the context of a tax dispute, we may have the law on our side but an auditor may not like the result and use a lot of “social pressure” to force a taxpayer to capitulate.

KJ – How can an auditor apply “social pressure”?

An auditor may yell and scream and threaten to “expose” the company’s “wrongdoing” in the newspaper. In a historical sense, being assessed in Japan by the government was a shameful thing. Since challenging an assessment usually meant you would lose your appeal anyway (the government is always right even if technically it is not) companies would usually settle in situations where in a Western society the company would litigate. This situation is changing and Japanese companies are starting to challenge the taxing authorities but this is a very long term process.

KJ - When companies outside the country consider investment in Japan, what should they understand?

JB – First, do not hire Japanese based upon their English language ability. This is hard to do if you do not understand Japanese but you should work hard to make certain you hire the best people for the job, not just those who speak English well. Second, you need to take into account the peculiarities of the Japanese market – merely transplanting your foreign operations and ways of doing business will probably not work.


KJ- What do you enjoy most about the work that you do as a Tax Lawyer in Japan working with a Big Four firm?

JB – One reason that I enjoy my profession is that as a consultant I have the opportunity to work with companies in different industries, with different types of transactions, etc. One luxury I have as a “gaijin” in Japan is that I do not have to specialize as much in terms of industry or tax specialty compared to some of my colleagues in the US. I am rarely ever bored.

KJ- It is my understanding you have four children. What are their ages and what is it like for them in Japan?

JB- My children’s ages are 12, 14, 16, 18 with the 18 year old currently attending college in California. Japan is really their home and they are considered “third culture children” which is another name for children who grow up in a culture other than their family home culture. Upon meeting one of my children, you would think they are ordinary American children given how they look, dress, speak with an American accent, etc. However, in many ways they are not American but they are not Japanese either. Their political beliefs and their “world outlooks” are much different than you would expect from someone growing up in the US.

KJ- China of course has been in the news a lot recently. What is the Japan view of the rise of China?

JB- In some ways, Japan views China in the same way as many in the US except that physically Japan is much closer. China is an opportunity for many companies in Japan but its rise may be something that should be closely monitored. Japanese companies are some of the biggest investors in China and China is now Japan’s largest trading partner. On the other hand, over the past century Japan was by far the largest economy in Asia and a relative great power in the region and now this is all changing. There is a word that is used to describe this phenomena and it is called “Japan passing”. For example, when the United States President flies to Asia, his first (and perhaps only stop) used to be in Japan. Now he may fly “past” Japan and stop in China first. Thus, in relative terms, Japan is declining which of course is something that can be unsettling.

KJ- Jack, thank you for taking the time to answer our questions. Your perspective is valuable to the Tax Intelligence Report readers around the world and we genuinely appreciate the time you gave to share your experiences.

Kathleen Jennings (KJ)
Editor, The Tax Intelligence Report
Kathleen@etsearch.com

Jack Bird (JB)
PricewaterhouseCoopers
Toyko, Japan
Jack.Bird@jp.pwc.com