Due to the ever growing number of international transactions and the increasing complexity of transactions today, the number of cases where there are significant differences in opinion between tax examiners and taxpayers is increasing. Tax examiners base their decisions on the latest tax circulars but their interpretations of the circulars are not necessarily correct all the time. The Japanese tax system is firmly based on the principle that taxation is governed by laws. Therefore, if there are any doubts about the interpretation and/or application of tax laws, a judicial judgment should be sought.
In the past, the number of tax litigation cases in Japan was relatively small and it was extremely rare for taxpayers to win cases. Recently, however, the percentage of suits successful in having tax rescinded is increasing. This may be due to the increasing number of judges and lawyers who have some knowledge of tax issues. The number, however, is still too low.
As part of the reform of the judicial system, the Certified Public Tax Accountant Law came into effect in 2002 and a new law allowing certified public tax accountants to provide assistance in tax suits (zeirishi hosa-nin seido) was established. Accordingly, certified public tax accountants are now able to appear in court with attorneys at law to make the necessary verbal arguments. With close collaboration possible between a certified public tax accountant, who specializes in tax issues, and an attorney at law, who has extensive knowledge of laws and litigation procedures, the ability of taxpayers to make claims and present evidence has improved remarkably and it is therefore expected that the percentage of cases won by taxpayers will increase. It is also expected, from a long-term perspective, that, by making tax suits more accessible, active discussions regarding the interpretation of tax laws will take place and contribute to the development of the Japanese taxation system.