The government is considering a plan to withhold taxes on winnings by nonresident foreigners at casino resorts to be introduced under Japan's newly-liberalized gambling laws, sources close to the matter said Sunday.
The government is studying such a tax system as once foreigners leave the country, tax investigations will prove difficult, the sources said. Countries like the United States and South Korea already employ a withholding tax system for winnings at their casinos.
In the system, the government is also considering making it compulsory for casino operators to keep records of chip purchases and win-loss results.
Under the system, winnings at casinos will be taxed in a similar fashion to horse racing. A tax will be levied on the difference between the value of the chips purchased and the amount of those converted back into cash.
The requirement to keep records of purchases and win-loss results is designed to prevent players from pretending that chips they won were ones they purchased, or from leaving some chips with a friend inside the premises to reduce their winnings amount.
The proposals will be included in the outline of fiscal 2020 tax reforms to be finalized by the ruling parties by the end of the month and are expected to be implemented under tax system reforms after April 2021.
"If we do not decide on a certain framework in advance, it will affect the investment decisions of operators," a Japanese government official said.
Japan plans to choose up to three locations at which to construct so-called integrated resorts -- casino resorts that incorporate a large hotel, conference rooms and gambling areas. The complexes are expected to start operating in the mid-2020s.
So far, Yokohama, the city of Osaka and Osaka Prefecture, Wakayama Prefecture and Nagasaki Prefecture have declared their intention to bid. Hokkaido pulled out of the race last Friday citing local concerns about the project's environmental impact, with many citizens also expressing unease over gambling addiction and other potential issues.