Jan 9, 2013

Vietnam - FIEs’ problems cause headaches to management agencies

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VietNamNet Bridge – Conducting transfer pricing, evading tax, running away with unpaid debts – all of the behaviors of foreign invested enterprises (FIEs) have caused big headaches to the Vietnamese management agencies.

Still fumbling for effective measures to fight against transfer pricing

Do Nhat Hoang, Head of the Foreign Investment Agency (FIA), an arm of the Ministry of Planning and Investment MPI said the ministry has submitted to the government plan to fight against transfer pricing. Since the works would cover the issues relating to the taxation, customs and corporate finance management, the government has assigned the Ministry of Finance (MOF) to preside the plan implementation.

On the cooperation of the two ministries in the fighting against price transferring, Hoang said each of the two has made some suggestions in building up the legal framework to prevent transfer pricing and building up the labor force qualified enough to conduct the investigations to combat with the transfer pricing.

MPI has also suggested building up a database with reliable information which allows comparing the prices of services and products. However, Hoang said, Vietnam itself cannot build up such a database, but it has to buy from different sources.

When asked if MPI considers revoking the investment licenses of the FIEs which have the losses higher than their chartered capital, Hoang said that management agencies would find out the true reasons behind the losses in order to be able to make reasonable decisions.

He went on to say that incurring loss could be the problem of any enterprise in the context of the economic downturn; therefore, Vietnam should give support to the enterprises which really take profit and only punish the ones which report virtual losses to evade tax.

“If we revoke investment licenses from all the unprofitable enterprises, this would worsen the investment environment,” Hoang said.

MOF, MPI, taxation bodies and local authorities all have shown their strong determination to fight against the transfer pricing, stating on mass media that though it is really a difficult task, they would never “give up the game.” However, Minister of MPI Bui Quang Vinh himself has admitted that Vietnam remains puzzled in dealing with the problem.

It’s impossible to hunt down escaped FIEs

Minister of MPI Bui Quang Vinh has confirmed that many FIEs have run away leaving big unpaid debts to taxation agencies and workers.

He also said that it is very difficult to deal with the enterprises. The courts and the local authorities can come forward and ask commercial banks to seize the enterprises mortgaged for loans. However, in case the assets left by the escaped businessmen cannot be handled that way, the debts would be… pending, because it is nearly impossible to find out the trace of the escaped businessmen.

Vinh said MPI is considering the international experience in order to set up legal provisions for Vietnam to prevent the risk. State management agencies would have to work out with the administrations of other countries to find out the escaped businessmen.

Regarding the issue, Minister of Justice Ha Hung Cuong has suggested that it is necessary to reconsider the legal proceedings followed by the courts. In the past, the Vietnam Chamber of Commerce and Industry (VCCI) handled with the cases very well. However, the problem is that the involved parties now tend to bring the dispute cases for trial overseas. Meanwhile, Vietnam seriously lacks the judges with fluent foreign language skills, good knowledge about international laws and economic laws.

Pham Huyen

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