Police uncover duty

Tokyo police believe they caught the mastermind behind a resale scheme who allegedly coordinated illicit purchases of luxury goods at duty-free stores so the merchandise could be resold at a profit, investigative sources said.

But when police sought to file fraud charges, they ended up grasping at straws.

It started when police discovered that a 24-year-old Chinese woman who was studying in Japan had purchased a luxury watch at a duty-free store despite not being eligible for tax-free shopping, sources said.

The Metropolitan Police Department arrested the woman on suspicion of forging her residence card. They also considered filing a fraud case to prosecutors but ultimately decided against it.

“There was no financial damage to the duty-free store,” a source said.

The woman purchased an Audemars Piguet watch, which is a Swiss luxury brand, at the duty-free store in Tokyo’s Nakano Ward in July 2021. She paid 4.85 million yen ($36,500) without tax.

The woman presented her residence card, which states that she is a student, according to the sources.

Foreign students are allowed to purchase tax-free goods, but her card set off red flags.

The woman had special permission to engage in activities such as part-time work, but in that case she would be obliged to pay taxes. There should have been a stamp confirming permission to work on the back of her residence card, but the stamp was erased from hers.

The woman’s residence card was found among several other cards at the home of a Chinese man, 32, arrested by police over an incident that had resulted in injuries.

Police later arrested the two on suspicion of violating the Immigration Control Law, alleging they conspired to forge the residence card.

Police seized the man’s cellphone and discovered messages on WeChat, a Chinese social messaging app somewhat similar to Japan’s Line app, that suggested the man was soliciting people to shop for duty-free items.

Investigators learned that he had repeatedly given forged residence cards to people who were ineligible for duty-free shopping and told them to buy expensive items such as watches and medicine without paying the tax, sources said. He then resold the items at other stores, they said.

The estimated total resale value was at least several tens of millions of yen.

The police suspect the woman purchased the Audemars Piguet watch at his instruction, and that it was resold somewhere else.

The duty-free system exempts foreign tourists from paying consumption taxes on goods they bring back to their home countries.

But people can manipulate the system by reselling the items domestically at the tax-inclusive price, earning a profit roughly equivalent to the tax.

Police suspect the man and woman were members of a group that engaged in this practice. Police examined whether purchasing duty-free goods for the purpose of resale could be considered fraud, but the sources said the case was dropped since the duty-free store did not suffer financial damage.

The two arrested were charged only with forging the residence card. They were convicted and given suspended sentences by October last year, which were later finalized.

A National Tax Agency official said the case is unusual because police were able to identify the mastermind as resale groups tend to rely on social media platforms that allow anonymity, making it difficult to determine who is behind these kinds of schemes.

“We’ll cooperate with the police and root out the unfair practice together,” the official said.