Transfer pricing office opens in bid to mitigate tax fraud hinh anh 1Illustrative image (Source: VNA)
The Ministry of Finance on October 28 in Hanoi announced the establishment of the Office for Transfer Pricing Inspection under the General Department of Taxation.

Speaking at the launch ceremony, Bui Van Nam, the general department's director said the establishing of such an office is being considered a useful solution to discover and resolve transfer pricing with increasingly complicated and sophisticated changes which have resulted in losses to the State budget.

Statistics from the department showed that Vietnam has 13,000 foreign direct investment (FDI) companies of which 4,098 transactions having signs of transfer pricing.

Nam said FDI firms have made an active contribution to the country's development. However, several FDI enterprises have resorted to tax fraud, and transfer pricing has been the most sophisticated violation.

"Tax fraud has given rise to unhealthy competition between local and FDI firms. The inspection on transfer pricing has many issues such as collecting data, and international cooperation. Inspection has been the most difficult issue in tax management across the world. Tax agencies took 2 to 3 years for inspection of several transfer pricing cases," Nam said.

The office would provide consultancy to the department in transfer pricing inspections such as building planning, building inspection process and collecting information. It would also collect information and study businesses operating in Vietnam which have signs of transfer pricing.

He said the tax sector would enhance tax inspection in the year-end months of the years. The office would also be established in four localities including Hanoi, HCM City, Binh Duong and Dong Nai which have high risks of transfer pricing.

Last year, the sector conducted inspections on transfer pricing at 2,866 businesses which reported losses or having signs of transfer pricing, increasing 80 percent over the previous year.

Tax agencies reduced losses of 5.83 trillion VND (259.1 million USD) at inspected companies and tax arrears of 1.7 trillion VND (75.5 billion USD), posting 82 percent and 112 percent year-on-year increase respectively.

The sector would promote tax inspection together with e-commerce management.

Nguyen Quang Tien, Director of the general department's Tax Reform and Modernisation Department said over the past three years, the sector discovered 29 violations, reducing losses of 300 billion VND (13.3 million USD) in one case and collecting tax arrears of 20 billion VND (888,000 USD) each on average.

The southern Dong Nai province has been one of the active localities fighting against transfer pricing. In 2013, the province's tax department uncovered several FDI firms with signs of transfer pricing.

He said they built up data based on special risks, especially for garment and textile and leather shoe sectors since Vietnam is expected to become a global manufacturing and processing hub.-VNA