The main opposition Constitutional Democratic Party of Japan is focusing on possible tax evasion to continue attacking factions in the ruling Liberal Democratic Party over their unreported political funds.

The funds in question consisted mainly of excess amounts obtained through sales of tickets to fund-raising parties by the factions. The factions then returned the money to the lawmakers who sold the tickets.

At question is what entity is recognized as having received these excess funds.

In revising their political fund reports, many LDP lawmakers said their political organizations received the “income” from their factions.

In that case, no tax payments are required because such political organizations are considered nonprofits exempt from taxation.

But CDP lawmakers are trying to show that the LDP members directly received the income from their factions. In that case, the money would be considered personal income, and the lawmakers would be obligated to pay income tax.

At the Feb. 6 Lower House Budget Committee session, Akira Nagatsuma, the CDP policy chief, pointed out revisions to the political fund report made by a member of the LDP faction once led by former Prime Minister Shinzo Abe.

Before the revision, the lawmaker reported making a donation to his own political organization. The report was revised to show that the donation came from the faction.

Nagatsuma used that document as proof that the flow of money went from the Abe faction to the lawmaker, who in turn donated the money to the political organization.

“If (the lawmaker) first received the money, would that not constitute his own personal income?” Nagatsuma said.

Prime Minister Fumio Kishida avoided responding directly to Nagatsuma’s question.

“We have not found a single example of lawmakers themselves receiving the money distributed by their faction,” he said.

Nagatsuma added that if the revision was a falsehood, the crime would be even bigger.

The CDP is also focusing on “policy activity expenses” that are distributed by the LDP to party executives. Under current law, lawmakers are not obligated to disclose how such expenses are used.

Opposition lawmakers said any leftover policy activity expenses for a given year should be considered miscellaneous income and subject to taxation.

The CDP’s Ryuichi Yoneyama pointed to the case of Toshihiro Nikai, the former LDP secretary-general who received a total of 4.8 billion yen ($32.4 million) in policy activity expenses during the five years he served in that post.

Yoneyama calculated that such a sum would mean that Nikai had to spend 100,000 yen every hour of the day.

“Is it possible for anyone to continually spend that amount, whether they are awake or asleep, for the sake of political activities?” Yoneyama asked Kishida.

Yoneyama said there must have been some money left over every year, and that he had asked beforehand for confirmation about whether Nikai had any unspent policy activity expenses.

Kishida only said it was his understanding that Nikai used the money to seek more Diet seats for the LDP.

The prime minister added that Nikai had no obligation to report the unspent funds because he had no miscellaneous income.

According to investigative sources, when the Abe faction distributed the excess money back to the lawmakers, faction staff members explained there was no need to list the sums in political fund reports.

Opposition lawmakers contend that the faction’s explanation gave the lawmakers the understanding that they were free to use the money as they saw fit.

If that was the case, the money should be considered personal income, according to Hiroyuki Konishi, a CDP Upper House member.

Kishida pointed out that prosecutors had looked into the money accumulated through fund-raising parties and certified that the cash went to political organizations as donations from the factions.

Lawmakers who revised their political fund reports after the scandal emerged also listed the donations as going to the political organizations they headed.

But a high-ranking official of the National Tax Agency said whether income should be taxed is a completely separate matter from what is included in political fund reports.

“What is written in such reports or how it is revised has no bearing on tax matters,” one official said. “It is our job to clarify where the money came from and how it was spent to check on whether appropriate returns were filed.”

It is not clear if tax officials are conducting any audits of political organizations in line with the money accumulated through fund-raising parties.

(This article was written by Kenji Izawa, Takuro Chiba and Yuta Hanano.)