Deputy Minister of Finance Do Hoang Anh Tuan spoke with Tuoi Tre (Youth) newspaper about limiting transfer pricing among businesses.
What are the focal tasks of inspectors to limit transfer pricing this year?
Transfer pricing is a term used to talk about evaluating the financial performance of different businesses of a conglomerate and shifting earnings from a high tax jurisdiction to a low one. Generally, a price transfer is carried out when businesses want to evade tax.
The Ministry of Finance has requested the General Department of Taxation to total transfer pricing cases in order to identify their various forms, measures and experiences.
The ministry is considering the establishment a task force to combat price transfers and gradually training a professional contingent of staff in the area. Besides this, the Ministry of Finance, in collaboration with the Ministry of Planning and Investment, is completing an anti-transfer pricing project.
How will inspections on transfer pricing be implemented this year?
We will focus on joint ventures, loss making enterprises, big tax debtors and those enterprises enjoying tax reduction and exemption.
We will also concentrate on banking, pharmacy, real estate, electricity, oil and gas, post and telecommunications.
Enterprises that have declared constant loss will be inspected. It is important to compare figures provided by buyers and sellers as well as relevant management offices to confirm them.
The Ministry of Finance will build a database of enterprises that have no history of tax evasion or fake loss. It might compile a law on anti-price transfer or amend Laws on Tax Management and Business to clearly regulate the obligation of supplementing funds in cases of loss exceeding the amount of registered capital.
Under HCM City Tax Department's proposal, the State needs to fix the sum of taxes that joint ventures must pay after three years if they do not generate income to be levied a tax. What is your opinion?
This method, also known as pre-negotiated pricing agreement, is being applied in many countries. This means tax offices will put forth a tax rate and negotiate with an enterprise about it before the investor decides to invest. The Ministry of Finance has proposed to supplement the regulation in a revised draft on Tax Management Law. An investment project in the northern province of Bac Ninh is also applying the method.
There is the opinion that price transfers have been common in the past partially due to the limited qualifications of tax officers?
We must acknowledge that as true. Only 58 per cent of tax officers hold university degrees. Many tax inspectors can not accomplish their tasks with their current experience, responsibility and skill level. Owners of big enterprises, especially foreign-invested ones, meanwhile, are very good and have experience in doing business. This requires inspectors in anti-price transfers to be trained further. They are expected to possess sufficient abilities in assessing each case and uncovering the signals of price transferring. They should be armed with market information and returns on equity.
One opinion suggested reducing corporate income taxes from the existing rate of 25 per cent as a measure to prevent businesses from practising transfer pricing. What is your opinion?
This is an opinion worth considering in the time to come. Compared with ASEAN countries, Viet Nam's corporate income tax is only higher than Singapore with 19 per cent. The figures are 32 per cent in Malaysia and 30 per cent in Thailand.
As planned, Viet Nam's current tax rate of 25 per cent might be reduced to 20-22 per cent from now till 2015. By so doing, it will limit the shift of earning from a high tax jurisdiction to a low tax one among businesses. — VNS