Following
the local tax agency’s campaign to curb transfer pricing, a number of
foreign-invested businesses operating in the southern province of Binh Duong
have been found to fake losses to evade taxes.
According to Binh Duong Tax Agency, Korea’s
Sung Shin Vina Co Ltd in My Phuoc II Industrial Park has reported an
accumulated loss of more than VND55 billion (US$2.68 million) during its
operation between 2007 and 2010 in Vietnam.
But the paradox was that the company
constantly expanded its production despite the huge losses, the tax agency
said, adding its revenue last year rose by 33 times compared with 2007.
The tax inspectors said the massive losses
were caused by the company’s trick whereby it imported materials from its
parent company in Korea at high prices while exporting its products back to the
parent at prices lower than market rates by 15 percent.
Under the provincial tax agency’s request,
Sung Shin Vina Co has adjusted the export prices in its financial report in
accordance with market prices, resulting in the actual profit of VND88 billion
instead of the ‘losses’.
Similarly, the car component manufacturer
Myung Jin Vina Co Ltd in My Phuoc III Industrial Park also bought materials
from its parent company Myung Jin Tec in Korea and sold its products under
market prices to DJV Co Ltd, another subsidiary of Myung Jin Tec.
After working with the tax agency, Myung Jin
Vina adjusted prices in its financial report, which showed that the company
actually enjoyed a profit of VND5.9 billion in 2008 and 2009.
The tax agency then collected corporate income
tax on the profits and fined the company VND456 million for the transfer
pricing act.
For its part, Ngu Kim Chinh Nguyen Co Ltd also
had to pay the corporate tax after tax officials found that it had falsely
reported losses in 2006 and 2007 under the same ruse as Sung Shin Vina and
Myung Jin Vina.
Half of FDI projects make losses
Binh Duong Tax Agency said 50 percent of the
more than 1,700 FDI projects operating in Binh Duong Province with a total
investment of US$14 billion had reported losses since 2006.
Vo Thanh Binh, deputy head of the agency, said
it was not easy to have the businesses admit to faking the losses.
He said some experts had suggested developing
a bank data to compare the businesses’ reported prices with the actual market
prices.
“But this is not simple since the companies
also have excuses for their low prices,” he said.
“For instance, they can plead that a shirt
made in Vietnam can cost lower than in Malaysia thanks to some tiny difference
in details while we do not have the Malaysia-made shirts to verify.”
Truong Cao Nghia, head inspector of the tax
agency, said the agency could only raise businesses’ awareness on their duty to
pay taxes to curb transfer pricing.
However, Do Hoang Anh Tuan, Deputy Minister of
Finance, said the anti-transfer pricing campaign had gained positive results in
some 20 localities around the country.
The tax agencies’ inspections on 500 FDI
businesses countrywide had detected many violators and increased the state
budget collection by VND1.2 trillion, he said.
TUOI TRE
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