The Ministry of Finance MOF and the United Nationals Development Program UNDP have announced the outcomes of the survey on the operation efficiency of FIEs. This is considered the biggest scaled survey ever conducted to find out the situation of FIEs in the period of 2008-2010.
FIEs take loss, rely on loans
An officer of the survey team said that of the 147 surveyed businesses, 42 had minus (-) ROE (return on equity) index, of which 22 FIEs had minus ROEs in three consecutive years. Even the profitable businesses also had modest ROE index of 2.7 percent, i.e. one dong of stockholder equity can create 0.027 dong of profit, the level which was far below the bank loan interest rate.
The survey shows a gloomier panorama of FIEs’ operation in 2011 in comparison with 2010. 38 out of the 147 surveyed businesses reportedly took loss, while 10 businesses have been found as taking loss continuously since the day of investment licensing granting and they still have not taxable income.
The total accumulative loss incurred by FIEs so far has reached 11,614 billion dong.
The total investment capital of the 147 FIEs had reached 8 billion dollars by December 31, 2010, or 1.9 times higher than the initially registered investment capital. The total accounts payable had reached 133,206 billion dong, accounting for 55 percent of the total capital. In general, businesses have been heavily relying on bank loans to maintain their operation.
Bad management leads to loss of revenue
MOF said it can see signs of FIEs making the so called “price transfer”, since a lot of FIEs reported losses for the last many years but still have money to expand business. The businesses reported high input costs and low sale prices to make artificial losses and avoid loss. Therefore, MOF has requested the General Department of Taxation (GDT) to take inspection over the businesses which reported losses for the last many consecutive years.
Vu Thi Mai, Deputy Minister of Finance, said that GDT plans to inspect 700 FIEs from now to the end of the year. Especially, taxation bodies would focus on the businesses which report loss for 2 or more years and still expand operation scale.
A large scale inspection was also carried out in the first nine months of the year at 500 FIEs, which found out the “unreasonable loss” of 3754 billion dong and forced the businesses to pay 1200 billion dong to the state budget.
However, MOF has admitted big problems in the finance supervision over FIEs. It said that the current regulations do not include the solutions which allow to control projects and disbursement as well as control the price transfer. 10,861 billion dong still has been transferred abroad by the FIEs so far, which reported loss business efficiency.
The ministry has pointed out that the current imperfect legal framework provides the loopholes for FIEs to avoid tax. Experts also believe that price transfer deals have still been carried out in Vietnam partially because the legal framework is not powerful enough, though the currently applied tax management law stipulates that taxation bodies have the right to set up the tax sums enterprises have to pay, in case they find out that enterprises trade goods and post prices at the levels not in accordance with the popular market prices.
The Vietnamese laws now do not have the provisions which force unprofitable FIEs to add more capital to maintain their existence and ensure their solvency. Experts believe that the new provision should be stipulated soon, and if the businesses which cannot get more capital for operation, must declare their bankruptcy.
Source: NLD
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