HCM CITY — Officials from the HCM City Department of Taxation said they would step up inspections of businesses that were believed to have reported losses for several years to enjoy lower tax rates.
Similar inspections in the last two years have yielded very good results, according to the department.
The practice of reporting losses to evade tax took place mostly in foreign direct invested (FDI) businesses, it said. One of the ruses used was to value imported materials much higher than actual cost and value exported final products at lower than normal prices.
The department said many companies had reported losses for years, sometimes of even higher value than their charter capital, but they had continued to expand production year after year.
In addition, companies that are subsidiaries of international companies often included in their accounts the expense of mother companies for advertising and promotion campaigns, as well as bank interest paid in other countries.
The department said such practices led to huge loss of taxation revenues, created an unequal business environment and triggered strikes among workers because they did not receive remuneration and bonuses commensurate with their work.
In 2010, the department investigated and inspected 90 businesses that admitted to incorrectly reporting losses to evade taxes. Overdue taxes worth VND360 billion (US$17 million) were levied on these companies. Last year, 203 businesses were inspected and VND1,08 trillion ($51 million) collected.
Thanks to the inspections, several companies that had not been inspected had corrected their accounting practices of their own volition, the department said.
Nguyen Trong Hanh, the department's deputy director, said they suggested that the General Department of Taxation set up specialised teams for this type of inspection.
The department also recommended that the Ministry of Finance set up a monitoring board to supervise this task from the central to local levels, Hanh said. — VNS