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MOF admits it hasn’t gone far in the fight against price transfer
The General Taxation Department has said that it has put 870 foreign invested enterprises (FIEs) onto the “black list” of enterprises suspected as committing the behavior of price transfer to avoid tax. However, the management agency still needs proof to sue the enterprises.
1001 tricks of evade tax
Lam Dong has 17 tea production and trade companies which have the total investment capital of 324 billion dong. The accumulative loss the enterprises had incurred by early 2010 had reached 317 billion dong.
Having doubts about the big losses of the enterprises, the Lam Dong province’s taxation agency, then tried to seek information about tea prices from different sources and discovered the frauds committed by the enterprises.
In general, the price of one kilo of tea material was 175,000 dong, while some FIEs were found as selling tea to the parent company in a foreign country at 64,850 dong per kilo only.
The taxation body did not accept the declared prices and invite the enterprises to attend a dialogue. The taxation body also discovered abnormal signs in doing business, for example, the foreign buyers paid in advance, lent to the FIEs without requiring interests, and the debt payment deadline. Finally, 10 out of the 17 enterprises had to accept to adjust the declared prices.
The HCM City Taxation Sub-department has discovered a new trick by enterprises to make the price transfer. Some enterprises joined hands to set up an independent group of enterprises. The satellite companies buy rubber and then sell the rubber at lower prices to the main company – the one that needs to be polished – to make the main company profitable.
Under the current regulations, companies can list their shares on the bourse if they can make profit for the last three consecutive years. When the company lists shares on the bourse, it would be able to attract a lot of shareholders thanks to the profitable business profile.
Only after mobilizing capital, did the enterprise expose its bad business performance, while the shares turned out to be nonsensical papers. This is, according to Nguyen Trong Hanh, Deputy Director of the HCM City Taxation Sub-department, can be seen as a kind of price transfer.
In Dong Nai province, the local taxation body has found out that many FIEs have been using different tricks to avoid tax. Especially, they have made the price transfer, dispersed profits through problematic contracts, transfer products in big quantities abroad and make the corrupt use of the investment incentives.
In 2010, the Dong Nai Taxation Sub-department requested Changshin Vietnam to reduce the reported loss by 120 billion dong, and Suzuki Vietnam reduce the loss by 70 billion dong.
Fighting against price transfer – how?
Deputy Chief of the General Department of Taxation, Nguyen Luan related that several years ago, suspecting the price transfer in a case where an enterprise imported a production line to Vietnam, the Ministry of Planning and Investment invited a prestigious valuation company from Switzerland to give consultancy in the case.
After the Swiss company gave the reference prices which were far different from the declared prices, the enterprise invited another valuation company. The case has been brought to the course, while no final decision has been made so far.
“It is obviously a price transfer case, but we still lack information to analyze the facts,” he said
Another high ranking official of the Vietnam General Department of Taxation has also said that the biggest problem now is the lack of the database about FIEs which can serve the analysis to find out if the enterprises make the price transfer or not.
Tien Phong
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