Preventing Transfer Pricing (06/6)
06/06/2011 - 22 Lượt xem
Transfer pricing is not a matter that concerns one particular nation but a matter of global concern as economic globalization is expanding and the exchange of goods between different countries is being facilitated. It has drawn the attention of many countries.
In Vietnam, a basic legal framework for dealing with transfer pricing was formed in 1997 and the Ministry of Finance has promulgated circulars guiding the implementation of the tax obligations of foreign investors. Of those, Circular 74/1997, Circular 89/1999 and Circular 13/2001 contain stipulations on transfer pricing. Since the Law on Enterprise Income Tax was amended to eliminate the difference in tax obligations between domestic and foreign investors, the Ministry of Finance has promulgated Circular 117/2005/TT-BTC guiding the definition of market prices in business transactions between the sides which have association relations (this circular has been replaced with Circular 66/2010/TT-BTC dated April 22, 2010). In the field of import-export, the Ministry of Finance has promulgated Circular 40/2008/TT-BTC dated May 21, 2008 guiding the definition of taxable value according to the General Agreement on Tariffs and Trade (GATT), based on which customs officials can deal with price frauds and transfer pricing.
Tax and customs officials have made efforts in inspecting, examining and dealing with price frauds. However, due to the lack of information and data as well as qualified human resources and necessary means, price frauds have not been dealt with in a systematic manner and according to existing regulations on transfer pricing prevention. Moreover, the coordination between State management authorities remains ineffective due to unclear responsibilities. Notably, tax officials are not yet given the right to investigate and deal with complicated, widespread violations which are related to partners beyond Vietnam's territory. This must be changed in the process of reforming and modernizing the taxation and customs sectors.
In order to carry out inspections and examinations effectively for transfer pricing prevention purposes in accordance with Governmental Resolution 11/NQ-CP, I would like to propose the following specific measures:
Firstly, based on existing information and data of the taxation sector, it is necessary to check the list of FDI (Foreign Direct Investment) companies and multi-sector, multi-field business groups so as to identify companies which have association relations to carry out synchronous inspections to prevent transfer pricing.
Secondly, based on the data reported by localities on the operations of FDI companies following the guidelines of the Ministry of Finance, it is necessary to classify FDI companies by analyzing factors such as profits/losses, revenue, tax payment, preferences which they are enjoying, capital size, the area of land they are occupying, the number of employees, and the investment situation. First of all, it is necessary to check the list of companies which have operated at a loss or have not made any revenue for many consecutive years, and companies which are suffering losses but continue to invest in expanding operations. It is necessary to compare those FDI companies with domestic businesses which are of the same size and operate in the same sectors in order to propose necessary inspections.
Thirdly, the Ministry of Planning and Investment, the Ministry of Industry and Trade, the Ministry of Justice and business associations must be consulted in order to adjust unsuitable contents of the regulations related to tax, accounting, statistics, market management, administrative violation treatment, and criminal judgment. At the same time, specific measures must be proposed to deal with transfer pricing and price frauds.
Fourthly, it is necessary to make sample questionnaires which require domestic companies to provide information about their foreign partners. Such information will be useful for the inspection work of the following years.
Fifthly, a suitable mechanism must be created to ensure effective enforcement of the laws and regulations on price control in Vietnam in the long term. It is necessary to make clear the responsibilities of State management authorities involved in price control. Based on the agreements for the avoidance of double taxation and the prevention of fiscal evasion which Vietnam has signed with other countries, it is necessary to maintain coordination between taxation, diplomatic, trade, planning and investment officials in investigating and dealing with transfer pricing and price frauds./.
Source: VEN.
