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Establishing a database of transfer pricing and tax evasion

07:42 | 28/02/2017

VCN - It is necessary to collect the database of taxpayers in order to improve the efficiency of the fight against transfer pricing and reducing the losses to the State budget, especially in the context of trade links becoming increasingly powerful as nowadays.  

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establishing a database of transfer pricing and tax evasion The Taxation agency has discovered the case of transfer pricing of Metro Cash & Carry and re-collected more than 507 billion VND. Picture: ST

As the report of the General Department of Taxation (by 11/2016), the whole sector has conducted inspections for 329 enterprises which had linking transactions. Since then, the sector has collected tax arrears and fined of more than 607.5 billion vnd. This has reduced 5,162.2 billion VND of revenue loss, 2 billion VND of deduction and increasingly adjusted the taxable income by more than 2,121 billion VND. Of these, inspections which are market revaluation with linking transactions re-collected of 211 billion VND, reduced by 3,922 billion VND of loss, increasingly adjusted the taxable income by nearly 1,966 billion VND.

According to the leader of the Inspection Department (General Department of Taxation), transfer pricing inspection is a complicated area, it often involves multi-national companies and international tax issues, so inspectors not only struggle with enterprises but also with a team of experienced consultants and lawyers. Therefore, transfer pricing inspections typically last longer than normal inspections. The inspections of transfer pricing are based on comparative analysis, so the information and data take an extremely important part. Without a database of comparative objects, the inspection will be at a deadlock. Therefore, building a database is the top priority mission in the management of transfer pricing, especially in the context of today's reality, when tax authorities have not bought commercial databases so focusing on building and perfecting a database of taxpayers is needed.

Determining the importance of this issue, right from the start of 2016, the General Department of Taxation has urgently implement measures to gradually build and complete a database from the internal data sources. However, according to a representative of the Inspection Department, the database establishment is still limited. In fact, data on taxpayers is incomplete and lacks accuracy; the data on the production fields of business activities of taxpayers is not close enough, not according with the actual business of enterprises. Furthermore, declared data of linking transactions is stored in the form of images so outputting data to serve the management purposes as well as the application of automated risk analysis cannot be done. Notably, some important information in the management of transfer pricing is the financial information of the parent companies, associated companies, industrial information, production and business models of taxpayers -not yet updated and stored in the database of the Tax sector.

In 2017, the General Department of Taxation will focus on investing manpower and capacity to deploy the collection of international documents on risk assessment and selecting cases which need transfer pricing inspection. At the same time, the whole Tax sector will continue to implement and strengthen the organizational structure of the tax inspection system at all levels, especially the transfer pricing inspection department in some major Tax Departments; and the inspection department at Tax Offices, to meet the requirements of inspection and tax examination.

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According to an economic expert, Mr. Nguyen Minh Phong: "The investment of effort, money and people in the fight against transfer pricing is purely a profitable investment, even a great profit because when the operation against transfer pricing in Vietnam comes into focus and essence, the revenue of the State budget would not be small, and also brings a healthy and fair business environment for genuine enterprises in the country and abroad which have been and will invest in Vietnam".

By Thuy Linh / Tuan Cuong