Oct 19, 2012

Vietnam - FIEs repudiate debt, causing big headache to taxation bodies

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VietNamNet Bridge – A lot of foreign invested enterprises (FIEs) have been found as fleeing Vietnam, leaving the unpaid tax worth tens of billions of dong.

Customs agencies reckon themselves unable

A report by the Ministry of Finance showed that by the end of February 2012, the unpaid tax sum had increased by 28.5 percent over December 31, 2011. The unpaid tax from the foreign invested sector had increased by 25.7 percent, while the figures were 13.9 percent for non-state economic sector and 4.3 percent for state owned enterprises.

The FIEs’ tax evasion and tax payment delay have become a big problem for the national economy with the unpaid tax of up to tens of billions of dong for each case.

Diing Long Vietnam in Binh Duong province, for example, still has not paid the tax sum of 17 billion dong for the materials imported to make products for export. Meanwhile, the members of the company’s board of management all have left Vietnam.

The company’s only asset left is a workshop on an area of three hectares in My Phuoc, worth 70 billion dong. However, the asset has been mortgaged at banks for the loans worth over 100 billion dong.
In this case, analysts comment, customs agencies can do nothing to recover the debt.

More and more FIEs have been found as fleeing their debts recently. The Hai Phong City Customs Agency has found 14 foreign invested businesses, whose owners have escaped from Vietnam, leaving the unpaid debt sum of 11.7 billion dong.

Meanwhile, the HCM City Taxation Agency has discovered 1114 businesses, whose owners have fled from the addresses registered to the management agencies, or have halted operation. The above said enterprises still have not paid the import-export tax of 416 billion dong.

In Binh Duong and Dong Nai provinces, there are numerous businesses from which customs agencies find unable to recover debts, since their assets all have been mortgaged at commercial banks for loans.
Since the enterprises cannot pay bank debts, banks would distrain the assets to take back debts, which means no money to be left to pay tax.

GREE in the Vietnam-Singapore Industrial Zone, for example, owes 22 billion dong to the taxation agencies. However, the managers of the company have disappeared.

South Korean Woolim Vina Company in Binh Duong province reportedly owes 13 billion dong in tax payment, though it stopped operation in late 2008 already. In late 2010, the Binh Duong Customs Agency asked competent agencies to make intervention to prevent the exit of the company’s managers, so that they can be present before the taxation bodies to clarify the tax problem.

However, the case seems to be more complicated than initially thought, because many parties have been involved in the case, including Vietnamese banks, Joint venture bank Shinhan Vina and Woolim Ind. Co. Ltd, or the holding company of Woolim Vina.

Law amendment needed

Hoang Viet Cuong, Deputy General Director of the General Department of Customs, has noted that some 100 enterprises have been founded as evading tax, mostly in the southern region.

Cuong has attributed the tax frauds to the current laws with loosened regulations. The laws stipulate that businesses can enjoy the tax grace period of up to 275 days since the day enterprises make customs declarations.

As a result, a lot of FIEs imported goods in big quantities, and then spontaneously stopped operation and the owners left Vietnam for the home countries.

The Ministry of Finance, which is considering amending the Tax Management Law, has proposed a new regulation which says that enterprises must pay tax before they get customs clearance.


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