Foreign companies under scrutiny

The HCM City Tax Department said its efforts to crack down on transfer price abuse by foreign-invested firms have proved successful, with tax revenues in the first seven months increasing by 22 per cent.

It joined battle two years ago with foreign-invested firms that under-reported profits or claimed losses by manipulating transfer pricing and they have begun to take it seriously, it said.

Nguyen Trong Hanh, deputy head of the department, told Tuoi Tre newspaper that the number of foreign-invested firms that had claimed losses for several years but have recently reported profits increased by 8 per cent.

Last year, for instance, 60 per cent of foreign companies in the city reported losses while Vietnamese firms of the same size in their industry were profitable both at home and abroad.

Many achieved this by importing machinery and goods from their parent companies abroad and fraudulently invoicing them at high prices and under-invoicing products they sold to their parents.

But the department was hamstrung because there were a huge number of firms in the city but limited personnel.

In Tan Binh District, for instance, the department had to monitor 14,000 firms with just 40 officials, he complained.

In 2009 and early 2010, the department investigated 40 firms on suspicion of pricing-transfer abuse. Since then, they had been reporting profits.

One of them even reported a profit of VND100 billion (US$4.8 million).

The department had its sights on large foreign-invested firms from South Korea, Japan, mainland China and others.

Recently many cases of abuse had been discovered around the country and punished.Officials admit that the practice continues because of the country’s inadequate legal framework. — VNS

Tags: Foreign companies in Vietnam