Tax authorities this year would inspect 7,800 enterprises, particularly those suspected of transfer pricing, in an aim to avoid tax losses and ensure a fair business environment, a conference heard yesterday in HCM City.
Transfer pricing is a new issue in Viet Nam, according to Nguyen Quang Tien, director of Tax Reform and Modernisation Department, who spoke at the conference, organised by the HCM City People's Committee and the Investment and Trade Promotion Center of HCM City.
Tranfer pricing takes many forms, all of which have appeared in Viet Nam. For example, it can occur with a company's tangible assets, intangible assets, internal service transfers, or payments of business-loan interest between associated parties.
Transfer pricing has occurred in foreign businesses and other sectors, including state-owned enterprises.
Nguyen Trong Hanh, deputy director of the HCM City Department of Taxation, explained that, under transfer pricing, investors use a variety of legal ways to minimise their tax payment duties and maximise their profits.
They could include falsifying input costs, especially exclusive materials costs imported from their parent companies, and depreciating selling prices.
Transfer pricing has become a popular form of tax evasion among enterprises, distorting the Government's investment incentive policies and creating an unequal competitive business environment as well as tax losses, according to Hanh.
The practice could also create social instability since enterprises blamed their losses for not increasing staff salaries. Many disputes to request higher salaries had already occurred, he said.
Tien said last year the tax authorities inspected 921 enterprises suspected of engaging in transfer pricing and claiming continuous losses from one year to another.
Through such inspections, tax agencies were able to dispute losses totalling VND6.6 trillion (US$317.2 million). They collected tax arrears and penalties worth VND1.66 trillion ($80 million).
To improve the efficiency of transfer-pricing monitoring in the future, Tien said the Tax Administration Law should be amended and supplemented to allow Advance Pricing Agreement (APA), which would help avoid future transfer-pricing disputes between taxpayers and tax authorities by entering into a prospective agreement on taxpayer transfer prices.
Relevant ministries and agencies should work with localities to identify and fight transfer pricing to avoid paying corporate-income taxes of associated companies, he said.
Other solutions are to improve the standards of tax officials and their skills in foreign languages as well as IT and economics.
Organising training courses and seminars for departments of taxation to exchange tax administration experiences on transfer pricing activity should also be encouraged.
Tien said the tax sector would continue to complete the taxpayers' database system, which would improve risk management and inspection of transfer pricing violations.