The Viet Nam General Department of Taxation (GDT) plans to examine over 63,200 enterprises this year, while conducting thorough inspections of around 8,700 firms in order to crack down on businesses suspected to have used transfer pricing.

Transfer pricing – that is, one division charging another part of the company for products and services it provides – is common practice among foreign-invested firms and a chronic problem worldwide. The strategy allows businesses to evade taxes by calculating each division's profits and losses separately.

Last year, when a number of multinational and foreign-invested companies claimed huge losses while continuing to expand manufacturing in the country, public and management authorities questioned whether they might be using transfer pricing.

Speaking at an online summary meeting for the tax sector on Thursday, GDT director Bui Van Nam said that transfer pricing, together with e-commerce, would be a top priority this year.

Last year, the department inspected and examined over 55,800 enterprises, collecting arrears and fines of about VND12.5 trillion (US$600 million) and amassing VND6.5 trillion ($312 million) for the State budget.

Tax authorities inspected over 2,000 enterprises alleged to have used transfer pricing and recommended collecting arrears and fines totaling nearly VND700 billion ($33.6 million). The inspection found that the real losses of the enterprises were about VND3.7 trillion ($177.6 million) less than the figure they reported.

Meanwhile, Viet Nam's tax sector struggled to fulfill its target last year. Taxes collected amounted to VND607 trillion ($29 billion), including VND140.1 trillion ($607 billion) from crude oil.

"The total collected tax was about 4 per cent higher than the planned target. But excluding taxes from crude oil, we only met 94.6 per cent of the target," said Tran Van Phu, vice director of the taxation department.

"The country's economic driving forces - Ha Noi, HCM City, Da Nang and Binh Duong - would fail to meet their tax targets if crude oil taxes were not included," he said.

Head of the HCM City Taxation Department Nguyen Dinh Tan said that last year was more difficult than any previous years.

A representative from central Da Nang City's department emphasised that the city collected fewer taxes last year than any other single year in the last decade and a half.

Meanwhile, according to the Ministry of Planning and Investment, about 55,000 enterprises across the country dissolved last year.

Statistics from the Ministry of Finance showed that until last November, there were 500,000 enterprises, household business and individuals enjoying tax exemptions, reductions and tax breaks worth over VND19 trillion ($912 million).

Phu from the General Department of Taxation said that this year would also be a difficult year for the sector, as it planned to collect VND644.5 trillion, nearly 20 per cent more than last year.

Deputy minister of Finance Do Hoang Anh Tuan said that taxes collected from natural resources mining increased while taxes from enterprises and customs decreased, signaling challenges ahead.

He asked the tax sector to concentrate on inspecting enterprises, especially big businesses and those that owed significant debts, claimed huge losses or received high tax refunds.

He also urged improvements in human resources, legal framework and e-tax declarations.

Source: VNS