Proof of corporations’ tax evasion continues to elude authorities

Proof of corporations’ tax evasion continues to elude authorities

A number of foreign-invested enterprises have allegedly tried to evade tax over the last 10 years but no proof of guilt has been found.

Mirae JSC (KMR), for example, has just reported a net profit of VND11 billion for the first six months of the year, which is VND5 billion higher than the initially reported profit, and five times higher than the profit gained in the same period last year.

In early April, KMR was asked by the taxation body to explain the differences in the figures shown on a 2013 finance report. Prior to the request, the enterprise reportedly adjusted the business report, showing that it had taken a loss of VND14 billion instead of a profit of VND4 billion.

PVX, a construction and installation company, earlier this year surprised the public with a reported VND500 billion in post-tax profit, which differed substantially from last year’s initial PVX report and its audited report.

Coca-Cola, the soft drink manufacturer, was named by the taxation agencies as a tax evasion suspect because it allegedly had engaged in transfer pricing. The giant has been repeatedly reporting losses over many years and has not paid any dong in corporate income tax.

However, despite big losses, the drink giant continues to expand its business in Vietnam, having announced a plan to pour another $300 million into the country by 2015.

The losses incurred by Coca-Cola are so big that Da Nang City authorities said they would allow Coca-Cola to set up a production base in the city if it continued to report losses.

Coca-Cola, together with Adidas, has been added on to the “black list” of enterprises suspected of conducting transfer pricing.

However, the suspected cases have never been clarified. Meanwhile, a representative of Coca-Cola said it would continue taking losses in Vietnam as planned.

Taxation bodies have also found something suspicious in the reported bad business performance of other enterprises, including Metro, which took losses in its 11 out of 12 years in Vietnam. Other companies include Hualon Corporation, which has reported losses for the last 20 years, and Nestle, with a cumulative loss of hundreds of billions of dong.

Meanwhile, Hualong Corporation declared the value of an old production line it imported at $16 million, while in fact, its value was $400,000 only.

Tax collection failure

According to ActionAid, rich countries give $100 billion to poor countries in aid every year. However, the actions of multinational groups to evade tax bring losses of $160 billion yearly, which means that poor countries have more losses than gains.

Cao Anh Tuan, deputy general director of the General Department of Taxation (GDT), said 39,000 businesses had been inspected as of September 2014, which allowed GDT to collect tax arrears of VND7.4 trillion.

However, as GDT admitted, it is very difficult to find evidence to prove the enterprises’ violations of the laws.

vietnamnet