Cars on display at the Mercedes-Benz Fashion Week 2015 held in Hanoi August 26-28, 2015
The General Department of Taxation has ordered its offices around the country to investigate automobile importers and distributors for possible tax fraud, news website VietNamNet reported Thursday.
The order came after tax officials in Ho Chi Minh City discovered that Euro Auto, BMW's authorized distributor in Vietnam, declared lower revenues by changing car prices in sales records in an attempt to pay less taxes in 2013.
The company was ordered to pay nearly VND6.6 billion (US$289,000) in unpaid taxes and fines, and is now under further inspection for their tax performance last year and before 2013, the website said.
Vietnam imported 64,420 complete-built cars over the first seven months, up 104.7 percent year on year, the Vietnam Customs reported, adding that the import turnovers increased by 152.3 percent to $1.71 billion.
Vietnam Automobile Manufacturers Association recently proposed authorities to tighten their management over the import of complete-built cars, claiming that importers could be manipulating import prices to evade taxes, according to the news report.
It was estimated that by reducing the price of a luxury car with an engine of 3 liters by $5,000, an importer can be relieved of around $10,000 in different taxes, it said.
However, not only car importers but foreign direct invested businesses manufacturing cars and car parts in Vietnam have also faced tax fraud suspicions.
A survey by the Vietnam Chamber of Commerce and Industry and the US Agency for International Development last year found that 51 percent of businesses making cars and their parts abused transfer pricing, the third highest rate after the sectors of financing and insurance, and textile.
With most of car parts being imported due to the shortage of local supplies, the businesses allegedly declared higher prices for imported parts in order to reduce their profits, thus paying less taxes.
*Editor's note: The story was updated on August 31 with a correct conversion of VND6.6 billion into US dollars.