Tax sector told to control price transfers better

Deputy Prime Minister Hoang Trung Hai called on the Finance Ministry to draw up an action plan aimed at better controlling price transfers at foreign direct investment enterprises in Viet Nam.

Accordingly, the ministry would design a legal system and specific guidance on preventing price transfers.

In addition, it would co-ordinate with relevant agencies and localities to promote investigations and check-ups at businesses to fight violations.

Hai said the MoF should establish a suitable training programme with the help of foreign consultancy to enhance management.

According to the ministry’s General Department of Taxation, up to 90 per cent of investigated FDI enterprises were found to have committed various forms of violations. Many companies with losses in excess of the owner’s equity had still expanded operations. The number of checked companies was very small in relation to the total of about 8,800 tax paying FDI enterprises.

An official from the department said companies had used many different ways of transfer pricing. The most common violation uncovered was to falsify production and business costs, salaries, deprecations, provision extraction, unrecorded expenses, and overspending.

“A number of FDI enterprises importing machines and materials from their parent companies at high prices, sold their products made in Viet Nam at prices lower than market level,” Hai said.

He added that many FDI enterprises still receive investment incentives from the Government of Viet Nam and expand production scales, although they continuously report losses.

Statistics from the department showed that last year anti-transfer pricing inspections and examinations increased in both quantity and efficiency.

It planned to encompass nearly 46,000 enterprises, representing a 10 fold increase from 2010, but actually investigated only 856, 67 per cent of the original target.

Losses were reduced by VND4.4 trillion (US$209.5 million), an increase of more than 2.5 times over 2010, while tax arrears and fines reached VND1.65 trillion ($78.5 million), four times higher than last year.

The department this year plans to carry out check-ups at more than 7,700 companies focusing on the banking and finance, real estate, electricity, petroleum and FDI enterprises who utilise price transfers and report losses to evade corporate tax.

It also called on taxation branches in localities to ensure a tax debt at the end of this year of less than five per cent of total collection, reducing half of tax debts waiting for resolve.

VNS

Tags: Vietnam Tax sector