VietNamNet Bridge – Reporting repeated losses, but still
scaling up business, Metro Cash & Carry, a distributor, and Coca-Cola, a
drink manufacturer, have raised doubts that they are conducting the transfer
pricing.
Metro Cash & Carry has
continuously opened new distribution centers recently in Buon Ma Thuot City,
Rach Gia (Kien Giang province) and Ha Dong in Hanoi, raising the total number
of distribution centers to 19, capitalized at 15-20 million dollars for each,
according to vietstock.vn.
Managing Director of Metro Cash
& Carry Vietnam Randy Guttery said the distribution chain plans to have
30-35 such centers in Vietnam in the next 3-5 years.
When asked why it still tries to
expand the business in Vietnam despite the loss, the manager said that in
general, the costs in the first years of operation are always high and
unstable, thus causing loss.
A question has been raised that
if Metro Cash & Carry is conducting the transfer pricing to evade tax.
Dau tu has quoted Le Thi Thu
Huong, Deputy Head of the HCM City Taxation Department, as saying that
inspection would be carried out on the enterprises which repeatedly report
loss, (in many cases, the accumulative loss exceeds the stockholder equity), but
still keep expanding their business.
Huong’s words can be understood
that Metro Cash & Carry Vietnam has been named in the list of the
enterprises to be probed.
Huong, when talking about the
tricks used by enterprises to conduct the transfer pricing, said that the
enterprises transfer the profits to foreign partners by declaring high expenses
paid to the foreign partners, such as the system management costs, salaries for
foreign workers, royalties or the fees paid to franchisors (Metro Cash &
Carry Vietnam is a franchisee).
The same thing is occurring with
Coca-Cola. The drink manufacturer two weeks ago announced the plan to pour
another 300 million dollars to Vietnam over the next three years, to raise the
total investment capital of the manufacturer in Vietnam to 500 million dollars.
Prior to that, local newspapers
reported that the Da Nang city’s local authorities said they would still have
to consider thoroughly before deciding on whether to allocate land to Coca-Cola
once the manufacturer has repeatedly reported loss over the last few years.
Though taking loss, the
enterprises do not intend to cut down the salaries paid to foreign workers,
while the pay does not depend on the business results. The most popular methods
applied by the enterprises is that they report very high prices of the
materials which they buy from the foreign holding companies, or report high
prices of fixed assets.
However, since the currently
applied Circular No. 66/2010 dated April 22, 2010, of the Ministry of Finance
does not cover all the arisen problems, taxation officers can only use the
currently apply inspection methods, which explains why the fight against price
transferring has just brought modest results.
One thing taxation officers need
to do when examining enterprises’ account books, is to find out the actual
prices of the services and goods by referring to the quoted prices of the same
kinds of goods available on the market.
However, the problem is that it
is very difficult to find out the goods of the same kinds on the market to
prove that the enterprises’ reported prices are higher than the real prices.
Coca-Cola is a typical example.
Eighty percent of the materials are imported from the foreign holding company.
However, since these are exclusive materials, it is very difficult to find out
if Coca-Cola reported wrong material prices.
Compiled by C. V
Business & Investment Opportunities
YourVietnamExpert is a division of Saigon Business Corporation Pte Ltd, Incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Healthcare and Life Science with expertise in ASEAN. Since we are currently changing the platform of www.yourvietnamexpert.com, you may contact us at: sbc.pte@gmail.com, provisionally. Many thanks.
No comments:
Post a Comment