FDI companies report losses to dodge tax

The Ho Chi Minh City Taxation Department has said that most of 20 foreign direct investment (FDI) enterprises it has surveyed have reported losses for several consecutive years to avoid paying tax.

Samyang Vietnam Co., Ltd., 100% capital owned by South Korea, produces footwear for export in Ho Chi Minh City’s Cu Chi District (Photo: TT)

These enterprises have seen turnovers ranging from tens to hundreds of millions of dong per year, yet have reported losses while continuing to expand their business and production.
 
For instance, a Taiwan-based garment company reported losses over many years, but in fact, its turnover and operation scale during that period had increased 10-fold.
 
After the taxation department discovered the tax dodging and asked the enterprises to explain, 18 suddenly reported profits for 2009. Some even pledged spontaneously to report profits.
 
As many as 708 of 1,254 enterprises who made tax declarations in 2008, reported losses. Most were from Asia.
 
South Korea ranks highest in enterprises reporting business losses, making up 30 percent of the total loss-reporting companies; followed by Singapore (12.57 percent), Japan (9.04 percent) and Taiwan (7.49 percent).
 
Most such enterprises specialize in manufacture technology, garments, footwear, and communications.
 
It is speculated that unscrupulous FDI enterprises could be transferring profits to their parent companies abroad where business income tax is exempt or lower than that in Vietnam.
 
This is possible as these FDI enterprises’ customers and suppliers are also their parent companies and thus, they are able to transfer profits abroad.
 
Officials have been tipped off during periods when FDI clothing enterprises reported losses while Vietnamese ones recorded profits. 

By Han Ni – Translated by Hoang Yen

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