Japan to Impose 17.8 B. Yen in Back Taxes on Alico Japan

Tokyo, Aug. 17 (Jiji Press)--The Tokyo Regional Taxation Bureau is
expected to impose 17.8 billion yen in back taxes on Alico Japan, the
Japanese branch of American Life Insurance Co.
Alico Japan declared latent losses on foreign currency-denominated
assets that resulted from the yen's appreciation, as tax-deductible
expenses. But the tax office did not accept the treatment.
Alico Japan had no intention to conceal taxable income and that the
tax office is unlikely to impose penalties, which are levied for serious tax
evasion practices, Alico Japan officials said.
The branch disagrees with the tax office on some points, and it is
examining an option of lodging a protest, they said.
Alico Japan invested part of its insurance premium income in
foreign assets including securities. But losses on the investments ballooned
as the yen soared due to the global financial crisis.
The branch booked the losses as expenses for the year that closed
in March 2008 in line with a Japanese tax rule allowing latent losses to be
treated as expenses if the losses reach 15 pct of the book value of the
original investments.
But the Tokyo office did not accept the treatment apparently
because Alico Japan used derivatives contracts to hedge the investments
against foreign exchange losses.
The anticipated tax payment is unlikely to have any impact on the
future earnings of Alico Japan, the officials said.