Home Ufotable Tax Evasion: One Story of Industry Problems

Ufotable Tax Evasion: One Story of Industry Problems

It’s 2021– most anime fans have likely heard of Ufotable and watched at least one of their shows, and some have probably even heard of Hikaru Kondou. Very few, of course, actually care to look at the company beyond the fact that they produce very popular titles from Fate/Zero to Demon Slayer: Kimetsu no Yaiba. Their quality as a studio also has varying praises and criticisms. Some people think they’re the peak of animation, and some people, like me, feel they’re a bit overrated in regard to their over-reliance on special and visual effects.

Regardless of how any person feels about Ufotable, it’s an axiomatic fact that they are one of the defining pillars of the modern anime industry.

Ufotable was founded in 2000 by former Tokyo Movie (TMS Entertainment) producer Hikaru Kondou, who has been the studio’s representative director since its founding. The studio already had a shred of style back then, but they were a small, mostly unknown studio up until 2007. Their main director was Hitoyuki Masui, and he directed several of their works between 2002 and 2004. Almost all of these works were pretty underground, including Weiss Kreuz Gluhen (a sequel to a series produced by Magic Bus), Dokkoida?!, and Ninja Nonsense.

Between 2004 and 2007, they produced a number of other titles that are also relatively unknown in the west, with the most important being Futakoi Alternative– a co-production with studios Feel and Studio Flag, but also their first big work with director Takayuki Hirao, who has been a collaborator of the studio ever since.

Then, in 2007, Haruo Sotozaki came into the spotlight with Tales of Symphonia the Animation, and Ei Aoki came into the spotlight with the first film in the Garden of Sinners franchise, which also marked the first time Ufotable would be adapting a work produced by Type-Moon. Sotozaki, today, is the director of Demon Slayer, and the studio’s relationship with Type-Moon has only grown since.

Around 2009, the company’s employee number was marked at a meager 35 people. That’s not a whole lot, but as the years went by, the company began to expand, not in a corporatist manner, but within its own studio. A part of this change was the creation of Ufotable Tokushima, a branch of the studio located in Tokushima (whereas the main offices are in Suginami).

Today, Ufotable sits around 200 employees, divided into animation staff at the main Suginami studio, animation staff at the Tokushima studio, 3DCG staff, compositing staff, and is one of the few studios to actively participate directly in scriptwriting and series composition (basically the main writing duties) work. Their Suginami studio also houses all of these departments together in order for the studio to very easily be able to communicate amongst its staff, which is the same thing Kyoto Animation and SHAFT do, for the most part.

In other words, the staff at Ufotable have a passion for what they do. They’re not making IPs just to make profits, and they’re not making anime just to satiate a demand for anime– not only the employees, but the staff running the studio too.

So, why then, was the Ufotable studio and Hikaru Kondou found guilty and fined for, tax evasion? Common sense would dictate that they were laundering money, or simply aiming to increase their profits, or any other inherently malicious activity you could think of. But the answer isn’t so clear-cut.

In court, Kondou himself admitted to evading corporate tax law, but the reason he suggested he did so is so that the company had enough money and capital that, in case of a worst-case scenario, he could still pay for not only production costs, but also continue to employ and salary his staff. Ufotable itself already holds more than just an animation business but is also one of the few studios to publish its own products, and own other services; like Production I.G, for example, Ufotable owns its own cafe brand, which itself has branches in Korea, China, and several cities in Japan itself (Nagoya, Osaka, Tokushima, etc.)

What gives Ufotable the ability to continue producing works as grandiose as it does, is because of this business model that extends beyond the anime industry itself, Kondou implies. It’s no secret that the anime industry suffers; studios like CloverWorks are at their knees to completely ridiculous schedules procured by certain production committees to certain works (see the issues within the Wonder Egg Priority production), so what gives Ufotable more leverage is not having to rely explicitly on their animation business.

Instead, they can support the animation business by having more income outside of it. Now, the National Tax Bureau’s (国税局) investigation says that part of the money was used on a house owned by Kondou, part of it was used on Ufotable’s Tokushima branch, and part of it was used to pay for shares in the company by other directors– so he could be simply lying to avoid the sentence.

Except: the establishment of the Tokushima branch has helped create a sustainable work environment for various animators and acts as a support studio to all Ufotable works; Kondou stated that he was using his personal remunerations for his house, and the studio has apparently turned down various offers for animation work due to the financial and scheduling risks.

It’s also worth noting that in the past several years, some Ufotable works have outright not moved in production. Remember when they announced a film for Katsugeki/Touken Ranbu… in 2017? Or when they announced Girls’ Work in 2010? Both of those have had no updates since; or if they have, vary sparingly to the point that they’re not notable updates.

The point being made is: despite Ufotable’s apparent size and attempts to mitigate an industry hurdling towards collapse, they’re doing their best to stay alive, and also create works that don’t meltdown halfway through production.

Hikaru Kondou and Ufotable are unfortunate victims of the anime industry. Personally, I don’t condone Kondou’s actions, but I can’t blame him either. He is a man who is worried about the way the industry exploits studios and its workers.

Source for the legal aspects and court-specific information: Daily Shinco
Featured image: ufotable logo/The Garden of Sinners, © KINOKO NASU / Seikaisha, Aniplex, Kodansha, Notes, ufotable

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