Kondo Says Tax Evasion Was Necessary To Keep Ufotable Studio Afloat

He claimed that the money coming from the clients did not match the production costs.

ufotable founder Hikaru Kondo said during his public trial on Dec 10, 2021, that tax evasion was necessary because it was hard to cover the animation costs of the studio from what the clients paid for producing an anime.

According to Kondo, he had to move money from the web store and cafes to his home to not only prevent part-time workers from seeing the cash flow but to help prop up ufotable, which was making a loss on every piece of work they were making.

Kondo said, “The quality demanded of anime keeps increasing … but because the production costs offered by the clients are relatively low, every time we produce a work, we always end up in the red.”

He explained to the judge that even if the base production costs are gradually increasing the money coming from the client-side has not changed a bit. This made the situation difficult for Kondo to make freelancers full-time employees in exchange for good enough work.

The former president continued, saying “[ufotable]s profit comes from the cafe business and the sale of goods. We have been able to continue our animation production because of these two areas. If our works do not become a hit … we will not be able to pay our staff salaries or recoup the production costs. I wanted to reserve a sufficient amount of cash so that I wouldn’t have to worry about working capital in case something happened.”

Daily Shincho, a Japanese website found out that Kondo had not only moved money away from other areas of the business without proper process but also moved profits from God Eater into the next fiscal year to reduce income on tax statements.

Furthermore, the money Kondo hid was scattered in his residence in Tokyo rather than locked in a safe. In March 2021, an investigator found 60 million yen (around US$530,000) in 1000-yen bills laying on the floor of a children’s room.

Kondo had used that cash to build up ufotable Tokushima – a regional anime studio that opened in 2009 to train staff prior to the period of which Kondo was charged for – purchasing land, as well salaries for Kondo and his wife.

When the prosecution questioned Kondo on the future of ufotable’s business, Kondo reportedly calmly replied that ufotable has not taken on any new animation contracts since 2020. They are only continuing to work on contracts already signed.

The Tokyo District Court found studio ufotable founder and former president Hikaru Kondo and the anime studio for violating the Corporation Tax Act, and the Consumption Tax Act and handed down the final verdict on Dec 10, 2021.

Kondo has been sentenced to 1 year and 8 months in prison with a suspended sentence of 3 years and the studio is fined 30 million yen; ufotable confirmed the news on their website.

Kondo admitted to the charges laid out of violating the Corporation Tax Act and Consumption Tax Act by failing to pay 138 million yen (about US$1.25 million) in taxes at a preliminary hearing by the Tokyo District Court on September 17.

Source: Daily Shincho via Crunchyroll

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