Audits find half of foreign firms make profits

Over half of the foreign-invested firms in Ho Chi Minh City that claimed losses in 2010 do make a profit this year, according to an audit aimed at detecting whether or not they engaged in transfer pricing, an illegal technique to evade taxes.

According to the auditing result announced by the Ho Chi Minh City Tax Bureau on Tuesday, 1,342 foreign-invested firms in HCMC have reported profits, which is 55.14 percent of the inspected firms.

The remaining 44.86 percent still reported negative taxable incomes and were yet to make a profit, informed Nguyen Trong Hanh, deputy head of the tax bureau.

Earlier, the HCMC Tax Bureau had closely monitored over 2,400 foreign-invested firms in the city as they were suspected of transfer pricing, a fraudulent technique whereby companies spread profits and losses in a certain way so as to enjoy minimal taxes.

Hanh said most of these enterprises were asked to submit their financial reports as they had reported loss in so many consecutive years.

He said their awareness have improved after the tax authorities encouraged them not to engage in transfer pricing.

The tax bureau would continue strict measures to prevent transfer pricing activities in both foreign and domestic companies, he promised.

Recently, many foreign-invested firms were found to have engaged in transfer pricing, causing great losses to the state budget and putting pressure on those that strictly follow tax rules.

It also resulted in many recent strikes as the foreign enterprises usually reported high salaries compared to total revenues while the actual wages are even lower than those at domestic firms, he added – Tuoitre

Tags: Vietnam banking industry, Vietnam finance, Vietnam financial