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FIE losses turn to profits
After being inspected, most of these enterprises, which had been reporting losses, released financial reports which showed profits.
The alarming tax evasion trend in foreign-invested enterprises is easing.
Nguyen Trong Hanh, Deputy Director of Ho Chi Minh City Department of Taxation, said while 60 per cent of foreign invested enterprises (FIEs) operating in the city had reported losses for many years, in the first seven months of 2011, 30-40 per cent of these enterprises reported profits.
The city’s tax collection reached 67 per cent of its annual plan of VND110.4 trillion ($5.3 billion) for this year and increased by 23 per cent compared to the same period last year.
Hanh said the department had worked with about 40 FIEs and found “fake loss” situations at most of the enterprises.
“After being inspected, most of these enterprises’ financial reports showed profits. Especially, an enterprise reported a profit of more than VND100 billion ($4.8 million) after reporting losses for 10 consecutive years,” he added.
It was a similar story at 17 FIEs who produced and traded tea in Lam Dong province. For the past 10 years, the Lam Dong Department of Taxation did not collect any corporate income tax (CIT) from these enterprises who reported losses for consecutive years.
However, Lam Dong Department of Taxation deputy head Phan Thi Vinh said after inspections, many FIEs admitted the” fake loss” situation by transfer pricing.
“After establishing that these enterprises made profits since 2005, the department collected tax arrears with the collected tax of VND8 billion ($386,473) because these enterprises still enjoyed a 50 per cent CIT tax reduction rate in accordance with Vietnam’s preferential tax policy for FIEs,” said Vinh.
According to a General Department of Taxation (GDT) report for the first half of 2011, it treated 107 FIEs as having reported fake losses for three consecutive years from 2008-2010 with tax arrears collection of VND2,230 billion ($107 million).
As planned this year, the GDT entrusted 63 local departments to inspect 870 FIEs which showed transfer pricing signals or reported losses for three consecutive years. The GDT’s Inspectorate will check 40 FIEs and 82 other units in a supplemented list from the Ministry of Finance (MoF) across 2011.
The MoF said it was considering amending the Tax Management Law which would set additional provisions to treat tax frauds and price transfer. It is expected that the amended law would be submitted to the National Assembly for ratification by 2012.
vietnamnet, VIR
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