A Steering Committee for anti-transfer pricing should be established

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Operational activities in the Ho Chi Minh City Tax Department: Photo. Nguyen Hue

Representatives of the authorities at the Conference said that so far there are no specific provisions on coordination relations between the relevant authorities and the Tax agencies, the anti-loss of revenues in transfer pricing are relatively lax and not as effective as expected According to Nguyen Duy Bach, a representative of the Ho Chi Minh City Department of Planning and Investment, Investment Law 2014 and Decree No. 50/2016 / ND-CP on penalties for administrative violations in the investment field did not mention the transfer pricing concept of FDI enterprises.

In fact there is currently no sufficient legal basis for the Investment Registration Authority to manage transfer pricing through the associated transactions for transfer pricing in FDI enterprises. In addition, the coordination between the Investment Registration Authority and other agencies to monitor transfer pricing activity has not been specified in current legal documents.

Currently, the Ministry of Finance is submitting the draft decree regulating the management of transfer pricing in associated transactions; and transfer pricing and anti-loss of State revenues, stipulating the responsibilities of the ministries and relevant industries.

When the government issues a decree regulating the management of transfer pricing in associated transactions, the Department of Planning and Investment will cooperate with departments and industries to monitor and manage the transfer pricing of enterprises, including providing information under the request of the Tax agencies

Representatives of the Economic Police Department (PC 46) and the Ho Chi Minh city Public Security, said although the General Department of Police and General Department of Taxation has coordinated for 10 years, there have been many disunited issues in coordination between Economic Police Agencies and the Ho Chi Minh City Tax Department.

Under the regulations on coordination, the Economic Police Department is the main leading point for information exchange. When the Tax agencies inspected, investigated and detected organizations and individuals who have criminal signs, the Tax agencies will transfer those cases to the inspection authorities and if the transferred cases have sufficient elements of crime, they will be handled by the Police Authority. If the cases do not have sufficient basis for prosecution, the inspection authorities will feedback to the Tax agencies to collect tax arrears and handle the administrative violations.

However, particularly in the field of transfer pricing, because PC46 has not power to manage FDI enterprises, the area management and information for the Tax agencies on violations in this field is very limited. This is also the reason why PC 46 of the Ho Chi Minh City Public Security has not received any dossiers from the Ho Chi Minh City Tax Department on requesting for handling violations on transfer pricing.

Besides the shortcomings mentioned above, the representative of PC 46 of the Ho Chi Minh city Public Security also stated that the coordination documents are common and have not been amended and updated for many years as well as the lack of coordination documents between the Tax office and Police agency at the local level also limits the effectiveness of coordination between the two units.

There has been a Joint Circular between the State Bank of Vietnam, General Department of Taxation and General Department of Customs on providing and exchanging information between Tax agencies, Customs and credit institutions on loan dossiers, transactions via account and payment remittance.

However, in order for the coordination to be more effective, in the opinion of a representative of the State Bank Ho Chi Minh City Branch, the Tax Department should propose the establishment of a Steering Committee for anti-transfer pricing with participation of relevant departments and industries; and an assisting unit and specific plans for each month and each quarter and periodical information exchange to evaluate the overall effectiveness of this activity, thereby clarifying the scale, scope, subjects and priority for each period to achieve actual effectiveness in addressing transfer pricing.

Commenting on the coordination on anti-transfer pricing, Mrs. Le Thi Thu Huong, Deputy Director of the Ho Chi Minh City Taxation Department acknowledged that up to now, there are no specific provisions, so when Tax agencies need coordination, they have to send written documents to request the units to support and provide information and though most units still support and provide information, they do not consider that as their responsibilities. The Ministry of Finance has prepared the Draft Decree on the management of transfer pricing in the associated transaction and anti-transfer pricing.

In which clarifying the coordination responsibility of the 7 relevant units including: The Ministry of Finance, the State Bank, the Ministry of Planning and Investment, the Ministry of Science and Technology, Ministry of Information - Communications, Ministry Industry and Trade and the People's Committees of provinces and centrally-run cities. With the above regulations, the coordination between the units in anti- transfer pricing will be more specific and more effective.

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Hence, according to Ms. Le Thi Thu Huong, the coordination of anti-transfer pricing will bring practical results, apart from the 7 units above, specialized associations and industries have also participated in the coordination because these associations not only manage specialized operations but also understand the performance of enterprises in the industry, the coordination of the associations with the Tax agencies will directly bring more effectiveness for anti- transfer pricing of Tax agencies.