OK, just no. Those last 2 rules are breaking so many workers laws & ethics violations that I question how they're still in business. For starters only paying in cash allows them to easily commit fraud & tax violations, if I'd have heard this alone I'd jump ship & report it.
Then these idiots are audacious enough to CHARGE their EMPLOYEES for being late. That's ridiculous on so many levels and if this practice is actually common in Japan then it's no wonder their economy is in the toilet.
Hasn't sex work been associated with organised crime for decades? I wouldn't be surprised if that representative is part of a "family". That type of place would use rules that a normal workplace wouldn't, so it wasn't that shocking to me.
Also, they pay in cash probably because they're paid in cash. Don't really expect clients to go and pay for sexual acts with their credit cards.
Would there be tax evasion? Abosu-fucking-lutely, but if they pay their employees fair wages and proper overtime then I don't see an issue. If I was in that situation, I'd declare only the standard hours I worked, all overtime never seemed to happen (that's only based on if they treated their employees like humans, which seems iffy at the moment).