A store of Metro Carry & Cash in Vietnam. File photo
Tax authorities in Vietnam are inspecting the local subsidiaries of US-owned Coca-Cola and German retailer Metro Cash & Carry for alleged tax evasion.
Nguyen Dai Tri, deputy chief of the ministry's General Department of Taxation, confirmed about the inspections at a press briefing on Friday.
Tax fraud allegations against multinational corporations in Vietnam, particularly those that have posted successive losses even after expanding their business activities, have existed for quite some time.
They resurfaced last week at an international economic forum, where executives of local companies accused foreign companies of tax avoidance.
Le Phuoc Vu, chairman of Hoa Sen Group, one of Vietnam's biggest private companies, said many foreign companies have been abusing transfer pricing.
He said Coca-Cola in particularly started doing business in Vietnam in 1994, and since then has kept expanding, but it has not paid any corporate income tax after reporting consecutive losses.
Responding to the claim, Minister of Planning and Investment Bui Quang Vinh then said local authorities had not found any wrongdoings at Coca-Cola.
In April, Vietnamese tax inspectors found multiple violations worth a total of VND507 billion (US$22.19 million) at Metro Cash & Carry Vietnam, which is now awaiting relevant authorities' approval for being transferred to Thailand's TCC Holdings.
They said more than 66 percent of the money was illegitimate losses the retailer reported in the 2006-08 period.
Transfer pricing allows related business partners to determine prices between themselves, without considering market factors. Abuses of the practice are often very difficult to prove, especially when it involves multinational corporations with a complex network of internal buyers and suppliers.
Tri told Friday's press briefing press conference that since the beginning of this year tax inspectors have also found signs of transfer pricing abuse at 1,600 Vietnamese-owned businesses.
The businesses, which reported the total losses of VND3.58 trillion ($156.74 million) from their transactions with associated partners, were ordered to pay VND418.9 billion ($18.34 million) in back taxes and fines, he said.
They were also deprived of tax breaks worth VND168 billion ($7.35 million).
The tax department will establish an agency tasked with preventing transfer pricing abuse soon, Tri said, adding that similar agencies will also be founded in Hanoi, Ho Chi Minh City, and the southern provinces of Dong Nai and Binh Duong.