Efforts against revenue loss and transfer pricing

VCN-On June 8, the National Assembly will discuss the final settlement of the State budget in 2018. One of the issues of great public interest is to combat losses of tax collection, especially transfer pricing issue of the tax industry.

efforts against revenue loss and transfer pricing
In the first quarter of 2020, more than 7 thousand inspections were conducted for the entire tax sector; more than 74 thousand tax records were checked at the tax office with the amount proposed for processing through inspection reaching VND 15,561.16 billion. Photo: TL

FDI enterprises still losing VND 400,000 billion

The story of tax evasion and transfer pricing became “hot” when the State Audit Office of the State Budget Audit of 2018 was published. In the report, the audit showedthere was still a situation of accounting and declaring a lack of revenue, determining the wrong cost, calculating the lack of value-added tax, corporate income tax and remaining profit payable to the State budget, this occurs in many businesses.

“The State Audit Office has determined the payable amount to the State budget in 2018 will increase by VND 8,151 billion, of which domestic tax petition is VND 3,217 billion. Through tax reconciliation, the State Audit has proposed increasingVND 861 billion to the State budget at 1,778 enterprises,” Ho DuckPhocis, General State Auditor, said in parliament.

This fact is showed by the Institute for Economic and Policy Research’sresearch report “Evasion and tax avoidance of foreign-invested enterprise income tax (FDI) in Vietnam” that waspublished lately. This report stated the transfer price of FDI enterprises is increasing and complicated. “Over 60% of FDI enterprises still have accumulated losses with a cumulative loss of nearly VND 400,000 billion. However, many of these businesses are still expanding their production and business, including many ‘big players’ in the world doing business in Vietnam,” the report read.

Commenting on this issue, Nguyen Thi Cuc – Chairman of Vietnam Tax Consulting Association, said that through transfer pricing, FDI enterprises have more financial advantages than domestic firms, resulting inunequalcompetition, causing “domestic” enterprises to lose market share, even some joint ventures are annexed and become 100% foreign-invested enterprises.

More than 60 thousand businesses violate each year

The figures on these ideas have been large; in fact, the amount proposed by the State Audit to increase revenues into the State budget through tax reconciliation is still very small compared to the amount of violations of the enterprise thetax industry discovered through inspections.

Talking about this issue, Nguyen DucHuy – Deputy Director of Propaganda Department Supporting Taxpayers, General Department of Taxation said thatover the years, the tax industry has had many tax management measures, strengthening investigation, inspection and handling of violations, especially taking advantage of transfer pricing to evade taxes. Statistics show that from 2010 – 2018, through inspection and examination activities, tax agencies at all levels detected more than642,400 times enterprises violatedenterprise income tax with the violation amount more than VND 35,900 billion,causinga loss of VND 185,000 billion. In 2018 alone, the tax agency carried out nearly 96,000 tax inspections of more thanVND 62,000 billion, of which nearly VND 19,000 billion was collected into the State budget; making fora loss of nearly VND 41,000 billion.

“In 2019 alone, the tax authority conducted about 96,240 inspections, direct checks at the business and more than 517,550 tax returns filed by enterprises at the tax office’s office, proposing to handle VND 64,525 billion which increased revenue to the State budget by VND 18,875 billion; deducting VND 2,701 billion, reducing a loss of VND 42,948 billion,”Huy said.

To combat more and more complicatedtax fraud and tax evasion , arepresentative of the General Department of Taxation said the tax office based on practical experience combined with application of information technology and evaluation criteria set of risk, review businesses with high tax risks, focus on industries, areas with risk, new business lines andbusinesses with associated transactions, signs of transfer pricing; enterprises suffer losses for many consecutive years, large tax reimbursement dossiers are used to formulate inspection and examination plans, and strive to conduct at least 19% of inspecting enterprises at enterprises. In addition, the tax agency also strengthened coordination with relevant agencies such as police, banking supervision and inspection agencies and other agencies to implement coordination regulations to fight against tax evasion, tax fraud, tax crimes andpromote inspection and examination exchange; urge enterprises to implement recommendations of the State Audit, Government Inspectorate.

In the perspective of experts, Nguyen Thi Cuc expressed her hope the efforts of tax authorities, auditors and inspectors, along with new provisions of the Tax Administration Law (amended) take effect from 1/ 7/2020 and its implementing documents are being developed by the Government and the Ministry of Finance (including Decree 20/2017 / ND-CP on anti-transfer pricing), which will help prevent tax fraud, tax evasion is much concerned by many National Assembly deputies when discussing the finalisationof the State budget and the finalisation of 2018 in the future.

By HongVan/Bui Diep

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