Around half the foreign companies operating in the southern province of Binh Duong have reported losses for several years in a row, provincial tax officials said.
They suspect that the firms have been submitting false reports to evade tax, the officials said.
Among the 700 foreign-invested firms that have reported losses, many have continued to expand production, Tuoi Tre newspaper reported Monday, citing Vo Thanh Binh, deputy director of Binh Duong's department of taxation.
Tax officials said some companies might have engaged in transfer pricing and falsified their reports to allocate profits to their affiliates.
Some others are suspected of buying materials from their parent companies at high prices and selling finished products at low prices back to the same companies.
Le Viet Dung, deputy director of Binh Duong Planning and Investment Department, said it's a fact that some companies have reported losses just to avoid paying taxes. The problem is that it's not easy to catch them in the act, he said.
Binh said checking prices and profits is not a simple task because companies can come up with many excuses to show that their production costs are high.
He said there should be conditions in the first place that bind foreign investors to certain profit requirements before they start investing in the country.
Tax officials also said that after they strengthened surveilance, some companies had stopped reporting losses.
Tuoi Tre cited Deputy Finance Minister Do Hoang Anh Tuan as saying around 20 cities and provinces in the country have made initial gains from their efforts to prevent transfer pricing and tax evasion.
The accounts of nearly 500 foreign companies with losses have been inspected and tax officials have found that VND3.6 trillion in losses were wrongfully reported, he said.