VCN - This is the opinion of Dr. Phan Huu Thang (pictured), former Director of Foreign Investment Department in the discussion with Customs Newspaper around the issue of production and business efficiency of FDI enterprises, against transfer pricing
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According to the report of the Ministry of Finance, in recent years, the revenue and profit of FDI enterprises have increased compared to the previous year, however, a proportion of FDI enterprises reported losses, accumulated losses, high increases of capital losses and there was no sign of reduction . How do you comment on this phenomenon?
Although I have not obtained the exact figures with the specific calculation announced by the Ministry of Finance, I am fully confident that when the Ministry of Finance has made such a report, it reflects the actual situation.
Here I have only one comment to make: Of the total number of licensed FDI projects in the country, by the end of 2018 there were 27,454 FDI projects operating in Vietnam, and small-scale projects also accounted for a high proportion (nearly 50% of projects have registered capital of less than 1 million USD, not to mention the number of projects with registered capital of less than 500 thousand is also quite large ...). The recent contributions of the FDI sector mainly come from large-scale enterprises, so if there is a research report on loss, accumulated loss of capital ... according to the type of scale and industry, FDI enterprises will see and understand more fully the real situation, helping research, management and finding solutions to overcome would also be more favorable.
In terms of difficulties, the biggest difficulties in production and business of FDI enterprises are in general the market, not the policies and administrative procedures, especially for small-scale enterprises without stable output. If there is a stable market, production and business will be stable and develop effectively to compensate for non-regulated expenses.
The phenomenon of transfer pricing of FDI enterprises is still on the rise and complex, according to you, what is the effective solution to limit this situation?
According to market rules, avoidance and tax evasion - with evolving management and technology at present from both sides, this can be seen: For managers, management is being increasingly fulfilled better, and for those who are managing businesses, the way of transferring prices by enterprises is still becoming more and more sophisticated. Specifically, enterprises are more experienced in using technology to increase the input value of machinery, equipment and technology; Sign up for a large investment but the actual equity is low...
And the phenomenon of price transfer has increased in Vietnam during the past time, or there would be no need for an official report from the relevant tax authorities. As far as I know, the tax administration agency has been very interested in this work recently, so it has discovered that some businesses that engage in transfer pricing, there is a need for deterrence and to have a recovery solution for effective prevention. However, inspection and supervision have not been carried out regularly, periodically, and there is a lack of coordination among management agencies.
Anti-transfer pricing does not distinguish new or old generation FDIs, as we currently have 27,454 FDI enterprises licensed to operate in Vietnam. In the coming period, in addition to prioritizing the new generation of FDI attraction with industry 4.0, Vietnam is still continuing to call for traditional FDI into areas, and to areas where Vietnam is lacking capital and needs to invest in accordance with the socio-economic development plan.
Regarding solutions to prevent this situation, I firstly recommend the need to strengthen and improve the quality of state management on anti-transfer pricing of FDI enterprises. Specifically, strengthening management linkages between state management agencies (such as between MPI and Ministry of Finance - Tax - Customs; Ministry of Industry and Trade - market - Trade representatives in foreign countries; between ministries, branches in the province and localities, between departments and agencies in the locality with departments, departments, institutes ... in ministries and branches on the situation of FDI projects in the locality. ..). At the same time, it must inform in time and internally about the situation of licensing, import-export, business ... of FDI enterprises. In the immediate future, localities will fully and seriously implement the reporting and reporting regime for FDI enterprises in the locality.
Besides, it is necessary to consider the classification of large-scale projects in the area to manage the transfer of prices to the ministries and branches of the Ministry of Finance as the focal point, along with the relevant agencies such as the Ministry of Planning and Investment, that are mainly responsible for general management of these projects and are members participating in anti-transfer pricing, because the Ministry of Industry and Trade manages the external market prices ... I think that an establishment of an inter-ministerial working group on the issue of anti-transfer pricing of FDI enterprises should be considered to work closely with localities. For small-scale projects, the local authorities to be responsible for the transfer of prices. At the same time, use international independent expertise when necessary.
After 30 years of attracting FDI, a big issue is that it is necessary to change the investment incentive mechanism in attracting investment so that the attraction of FDI is really effective, worthy of the incentives that FDI enterprises received. What suggestions do you have about this issue?
First of all, it must be affirmed that the recent mechanisms and policies for FDI attraction are consistent with each stage of development and have brought about great achievements, but in the process of development, there can be some problematical existences. And before each new development stage, the consideration of setting up new preferential mechanisms applies specifically to the new phase of continuing innovation to improve policies for attracting and using FDI more effectively .
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At the conference to summarize 30 years of FDI in Vietnam in October 2018, assessing the preferential mechanism stated: "The incentives are also spread, horizontally, by capital scale, not in depth ... So, the effect from the incentives is still low”. Therefore, in the coming period, it is necessary to consider the transition of preferential mechanism from horizontal to vertical (value-added incentives, according to specific contributions of each FDI enterprise to the state and community; using high technology, environmentally friendly, strengthening links with domestic enterprises, ensuring long-term jobs, good life for many employees ...); recovering incentives for FDI enterprises when they fail to meet the conditions to enjoy incentives ... Particularly for large-scale projects, there is a big impact on the structure of the industry and the region. Certainly, according to the socio-economic development plan, there is a special mechanism approved by the Prime Minister to attract such projects.
Thank you very much!
Deputy Prime Minister Vuong Dinh Hue:
Need a "special task force" on anti-transfer pricing "The orientation in the coming time is to continue to attract but to be oriented and selective. The policies of tax incentives and land use preferences need to be determined through different periods and cannot be applied as before. Calculating and attracting FDI in the context of strong technology development and calculating and applying technology transfer solutions to domestic enterprises.
Vietnam needs a more flexible incentive mechanism, including non-financial measures to attract important large projects from multinational corporations, especially multinational corporations with headquarters and a central innovation mindset in Vietnam. To attach importance to perfecting policies on the use of land inside and outside industrial parks, raising investment efficiency of 1 ha of used land, meeting investment quality requirements and ensuring urban and commune development demands.
Regarding tax administration, foreign investors and international organizations recommend that Vietnam must have a specialized department of inspection and control against transfer pricing instead of concurrently as it is presently. This department can be called a "task of anti-transfer pricing" which is specialized, trained, and invested ... In addition, the units must join hands to build a comprehensive national information data system to sharing information about FDI enterprises from registration, expansion, new establishment, additional investment, revenue, costs, profits, ... to facilitate management. Thus, it brings high efficiency. "
Deputy Governor of the State Bank Nguyen Thi Hong:
It had better set conditions for investment capital "The number of FDI enterprises currently accounts for only 3% of the total domestic enterprises, but the total assets are up to VND 5 million. In the context of total assets being VND 5 million, the total equity of FDI enterprises is 1.5 VND million billion, including foreign investors' contributed capital into Vietnam and borrowed capital. In fact, many foreign investors have established a commercial presence as residents in Vietnam, then this not only to increases the country's foreign debt, but also to limits the transfer of foreign investors' capital more easily.
According to the State Bank's statistics, 140 enterprises with a ratio of loan to equity capital of more than 4 times are all FDI enterprises. Particularly, there are enterprises with "ultra-thin" capital such as CapitaLand Tower with 1 billion. The rate is 1,800 times; Samsung Display is 132 times more ... Therefore, it is necessary to have conditions when attracting FDI to make the most of the capital of investors in Vietnam, instead of borrowing capital ". Hồng Vân (written)
By Thu Hien/ Bui Diep