Trade Commission Approves UMG/EMI

Two weeks ago, Japan’s Fair Trade Commission unconditionally approved Universal Music Group’s proposed acquisition of EMI Recorded Music in the territory it oversees.

“We are continuing to work constructively with regulators in other jurisdictions, and look forward to clearance elsewhere in due course,” a UMG representative said.

The approval follows a similar ruling in New Zealand in June. Regulators in the European Union and the United States are still scrutinizing the $1.9 billion deal.

In other Universal news, Japanese tax authorities accused the label of failing to declare about 9 billion yen ($114 million) in taxable income between 2008 and 2010.

According to the Yomiuri newspaper, Universal restructured in October 2008 and borrowed a huge amount of money from a company in France and then reported the interest it paid on the load as a loss.

The Tokyo Regional Tax Bureau believes Universal Music (Japan) did this specifically to avoid paying taxes by transferring income overseas. The effective tax rate in France in 33.3 percent, while in Japan it is 40 percent.

As a result, the tax authorities have imposed a 3 billion yen penalty on Universal, which has already filed an appeal with the National Tax Tribunal. An official of the company told the Yomiuri, “Our company followed appropriate procedure under tax law.” However, a former executive of the firm also said, “The company didn’t need to borrow money, as it had internal reserves.”