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MOF determined to fight “counterfeit losses”
In the first six months of 2011, taxation bodies dealt with 107 enterprises which declared losses and collected the tax arrears of 2230 billion dong. The figure is expected to reach five trillion dong by the end of the year.
The Hai Phong City’s Customs Agency has released the decision to collect 32 billion dong in tax arrears from Ford Vietnam. The automobile joint venture may be forced to pay the tax arrears of nearly one trillion dong more for 155 other customs declarations. The move has been commented by analysts as showing the strong determination by the Ministry of Finance (MOF) to fight against tax revenue losses.
Drastic measures taken to fight tax evasion
In its customs declarations, Ford Vietnam stated that it imported car parts for domestic assembling. However, the customs agency later discovered that the products imported by Ford Vietnam could not be considered as “car parts” to be able to enjoy the low tax rates of 0-27 percent.
Therefore, Ford Vietnam has to pay the tax rates of 80-82 percent which have been applied to the imports under the mode of complete built units (CBU) instead of 0-27 percent which have been applied to car parts and accessories.
Some other automobile joint ventures have also been discovered as using the same trick to evade tax and they all have been requested to pay tax arrears.
The case of Ford Vietnam shows that the Ministry of Finance has intensified the inspections in order to prevent from tax revenue losses. Deputy Minister of Finance, Do Hoang Anh Tuan said that the key task of the taxation bodies in 2011 is to inspect the tax declarations at the enterprises which have been suspected as making the so called “price transfer”.
The General Department of Taxation (GDT) has assigned 63 local taxation agencies to inspect 870 foreign invested enterprises which have shown suspicious signs and the ones which have reported losses in the last three consecutive years (2008-2010).
GDT has instructed to check the records for tax refund of 100 percent of the enterprises which have continuously reported losses, or the enterprises, which have the ratio of profits on revenue at below two percent.
According to GDT, the department dealt with 107 enterprises which declared losses in the first six months of the year and collected 2230 billion dong in tax arrears. It hopes that the figure would reach five trillion dong by the end of 2011, when taxation bodies finish the inspections at 870 foreign invested enterprises.
The list of the enterprises which reported loss for 2010 includes “big names” such as Big C, Metro Cash & Carry and Philip Morris.
At a meeting with enterprises in HCM City on July 20, Nguyen Trong Hanh, Deputy Director of the HCM City Taxation Sub-department, said that numerous enterprises have been discovered as having signs of committing tax frauds. Taxation bodies now have to classify enterprises in accordance with the tax fraud risk levels for easier management.
According to Hanh, about 10 percent of the total 170,000 businesses in the city have been put into the group of enterprises with high risks.
Especially, Hanh said that the price transfer has also been applied by domestic enterprises
Loopholes exist
An official of the Ministry of Finance said that in the case of Ford Vietnam, four management ministries, including the Ministries of Finance, Industry and Trade, Transport, Science and Technology, once strongly debated about the way to calculate tax to find out the final decision.
Prior to that, it took relevant ministries two years to argue about the tax rates to be imposed on VAN imports. Some said that VAN should be considered as passenger cars, while others said the vehicles should be taxed as cargo trucks. Regarding the case, enterprises lodge complaints directly to the Prime Minister, while Minister of Finance Vu Van Ninh had to explain this at a National Assembly’s session.
Analysts have pointed out that as loopholes still exist in the legal framework, regulations have been interpreted in different ways, which has raised a lot of arguments among management agencies.
vietnamnet
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