Call for new laws to halt abuse of transfer pricing

VietNamNet Bridge – Experts have called for legal framework regarding transfer pricing to be supplemented and completed as a matter of urgency.

They also recommended better qualifications for tax officials to enhance effective management and prevention activities against transfer pricing cases.

According to the president of the Viet Nam Tax Consultants Association, Nguyen Thi Cuc, transfer pricing - the price that is assumed to have been charged by one part of a company for products and services it provides to another part of the same company, in order to calculate each division's profit and loss separately - was a chronic problem not only in Viet Nam but also many other countries.

She said that it was difficult to accuse enterprises of transfer pricing due to Viet Nam's management agencies lacking evidence and data to compare enterprises' prices in different countries.

Proving that enterprises have committed transfer pricing might even exceed the ability of tax authorities, said Vu Xuan Tien from VFAM Consulting Company, adding that the investigation process could prove unaffordable given the authorities' limited budget.

He pointed out that the current Vietnamese law on tax management also lacked detailed provisions on transfer pricing prevention.

According to Nguyen Quang Tien from the Viet Nam General Department of Taxation, transfer pricing management required high professional knowledge and power to be effectively enforced.

However, to date, the tax sector had not been empowered to investigate transfer pricing cases. So, the management of transfer pricing was hardly implemented efficiently, he said.

Tien said staff proficient in international accounting, tax policies and foreign languages were a very important factor in harnessing better transfer pricing management, adding there are very few current tax officials that meet these standards.

According to Nguyen Van Thu, president of the Viet Nam Mechanism Association, databases for specific sectors and industries, including raw material prices and information about advanced technologies, were needed for evaluation and comparison to better manage transfer pricing.

Source: VNS

Vietnam, new laws, transfer pricing, tax policies, qualifications for tax officials