Viet Nam's milk price is more expensive than that of many regional countries. Statistics from the department showed that Viet Nam has 13,000 foreign direct investment companies of which 4,098 transactions having signs of transfer pricing. — File Photo

HA NOI (Biz Hub) — The Ministry of Finance yesterday in Ha Noi 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 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 Viet Nam 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 co-operation. 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 Viet Nam 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 Ha Noi, 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 per cent over the previous year.

Tax agencies reduced losses of VND5.83 trillion (US$259.1 million) at inspected companies and tax arrears of VND1.7 trillion ($75.5 billion), posting 82 per cent and 112 per cent year-on-year increase respectively.

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

Nguyen Quang Tien, director of the department's Tax Reform and Modernisation Department said over the past three years, the sector discovered 29 violations, reducing losses of VND300 billion ($13.3 million) in one case and collecting tax arrears of VND20 billion ($888,000) 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 Viet Nam is expected to become a global manufacturing and processing hub. — VNS