Photo/Illutration Duty-free shops at Tokyo’s Haneda Airport (Asahi Shimbun file photo)

A significant loophole in Japan’s duty-free system has been revealed after nine individuals were found to have purchased over 100 million yen ($659,000) in duty-free goods but failed to take them out of the country as required.

The nine travelers are suspected of reselling their purchases for illegal profits before leaving Japan.

According to the Board of Audit, these individuals purchased a total of 3.4 billion yen's worth of goods in fiscal 2022, evading 340 million yen in consumption taxes.

Duty-free goods purchased in Japan are intended solely for export and cannot be resold domestically. Customs officials are responsible for collecting the 10 percent consumption tax from individuals who fail to take the goods out of the country.

Previously, customs officials were only permitted to levy these taxes through written notices, which took considerable time.

The law was amended in April 2022 to allow for verbal notices to address concerns about individuals attempting to evade taxes by arriving at the airport just before boarding.

However, customs officials at Narita and Haneda airports failed to verbally levy taxes on the nine individuals.

The board found that this oversight was caused by a misunderstanding of the revised law among Finance Ministry officials. This led to providing incorrect guidance to customs staff.

In a separate finding, the board revealed that customs officials levied consumption taxes in 367 cases in fiscal 2022 due to suspicious circumstances. This includes departing travelers not possessing the duty-free goods they previously purchased.

To prevent the illegal reselling of duty-free goods, many countries have adopted a refund system where the consumption tax is refunded to foreign visitors upon presenting their purchases at customs upon departure.

Japan is considering introducing a similar system.

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