VietNamNet Bridge - Many foreign firms have reported losses to avoid paying tax though they may lose their licence as a result but they continue to apply for and get value-added tax refunds.

Under Vietnamese law, if enterprises sustain accumulated losses that exceed their capital, they will lose their legal status.

But in reality, most continue to operate and even expand their business. They report losses just to evade income tax.

They apply for VAT refunds on exports, and get billions of dong (VND1 billion = US500,000) in refunds.

To encourage exports, the Government waives VAT for producers of export goods.

US-owned Clover Vietnam Company, for instance, has reported losses of around VND13 billion (US$650,000) which exceed its chartered capital. But the tax agency refunded the company some VND736 million (US$36,800) in VAT last year.

Taiwanese-owned Pou Yuen Vietnam Company has reported losses for decades but has received billions of dong in VAT refunds.

For instance, it got VND11 billion in 1999 and VND10 billion, VND19 billion, VND13 billion, VND14 billion, VND39 billion, VND55 billion, VND108 billion, and VND74 billion in the succeeding years.

Orange Fashion reported an accumulated loss of VND53 billion ($2.65 million) in 2005-2009, VND23 billion more than its legal capital of VND30 billion ($1.5 million).

Since establishment, the company has received VAT refunds worth VND70 billion ($3.5 million) on 17 occasions.

Earlier this year it applied for an additional VAT refund of VND2.7 billion ($135,000).

Evader’s trick

The firms get the VAT refunds easily because they can get them upon application, even before their documents are examined.

Besides, foreign firms’ tax reports are always “proper” since they are made by highly-paid accountants.

According to preliminary statistics from the Ho Chi Minh City Taxation Department, the top 10 firms who seeking refunds in the past two years mostly comprise foreign firms.

They include Premier Oil Vietnam Offshore BV, Kumho Asiana Plaza Saigon, and Pou Yuen Vietnam. Each sought a refund of over VND200 billion ($10 million).

Though the tax department claims to know that some unscrupulous foreign firms have surreptitiously transferred profits to their parent companies abroad, it has failed to find evidence.

It said the modus operandi was to import raw materials and feedstock at high prices and export products at low prices, both to their parent companies.

Companies have generally been able to evade tax by taking advantage of the department’s lax management.

According to the Planning and Investment Department, the city has nearly 3,500 foreign enterprises.

But the taxation department said it can only oversee 2,500.

The government offers foreign companies tax and other breaks to invest in the country and create jobs. But the FDI companies pay moderately.

Pou Yuen Company, which has the largest number of workers -- around 70,000 -- pays a worker VND1.4 million-1.5 million ($70-75) per month on average, the minimum wage stipulated by the Government.

Source: SGGP