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Mr. Wayne Barford, senior adviser of the International Tax and Investment Center, former Australian Taxation Commissioner.

At present, in the management of taxation, transfer pricing is considered as a remarkable activity, and always highlighted by the authorities for the avoidance of high tax losses. How do you assess this activity?

Transfer pricing is a very normal activity, occurring every day in enterprises, whether Vietnamese or multinational enterprises. This is also the business trend of the 21st century. It could be among the domestic enterprises or between the domestic enterprises with foreign enterprises. Regularly, the transfer is not a problem. However, if the transfer pricing is not true and does not follow the general principles of business, especially among the multinational companies, it will be not right. At present, many people are still unclear on this issue.

In fact, large enterprises often want to invest in the countries with tax incentives. From my experience, the enterprises want to be treated fairly under the laws. Large enterprises often do not care about tax evasion, but want to focus on investing and following the rules of the law. I would like to mention one thing about the prior agreement on the price for taxation (APA). That is the enterprises exchange with the Tax Agencies for dealing with them about performing future transactions. It is a win-win situation for both parties. The large companies are often very transparent and open to the public. Many multinational companies have adopted this approach in Vietnam. Everything went well and was approved by the General Department of Taxation.

In Vietnam, the Government as well as the Tax administration agencies attach great importance to transfer pricing. How do you assess Vietnam's efforts to prevent tax losses from illegal transfer pricing?

It is important that the Government of Vietnam has issued the Government Decree No. 20/2017/ND-CP regulating the tax administration for the enterprises with associated transactions, and Circular 41 guiding the implementation of a number of articles of Decree No. 20/2017/ND-CP. These legal provisions provide the clear transfer pricing guidelines for the management agencies as well as the enterprises. These regulations are made in accordance with the recommendations of the Organization for Economic Co-operation and Development (OECD), which focus on the principle of comparison between the multinational companies and the related companies and the independent transactions. This approach is based on comparable cases, from which, the transfer pricing cases among the multinational companies can be considered and the decision is made on whether the price of the associated transactions is equivalent to the price of the independent transactions. If this is right, the transfer pricing will not have a negative impact. But if the transfer process is considered as problem, it should be re-evaluated for inconsistency.

The legal basis is said to be quite complete and clear. So in the implementation process, in your opinion, what is the challenge for Vietnam?

When evaluating the price transfer, it is difficult to determine an exact price that is given as estimated figures. We rely on experience, the actual situation to make appropriate estimates. Viet Nam is applying the OECD principles. Other countries have adopted these principles and of course, they face certain challenges. However, this model works quite well. But it depends on how Vietnam coordinates with other Governments to collect the necessary information. This is very important.

I realize that Vietnam has had good relations with many countries in the world and solved many issues related to transfer pricing. In return, Vietnam also provides the necessary information for other Governments to deal with transfer pricing issues. When mentioning about transfer pricing, we need to consider and reaffirm, that transfer pricing is a very normal activity among enterprises, and multinational enterprises themselves want to carry out transfer pricing activities according to current regulations.

So, what advice do you have for the Government of Vietnam to implement the regulations on transfer pricing?

Currently, based on the OECD model, we have four possible solutions for the transfer problem. The extended arm principle brings a more general view of the transfer pricing. We have four ways of applying test models. This problem is also very complex and confusing for many people. The issue is that the Government of Vietnam needs to collect the information from the foreign judiciary. This is a great challenge for any Government. However, any multinational company can cooperate with the Government and provide the necessary information.

Need strong penalties for transfer pricing VCN - Although there has been great effort in anti-transfer pricing , but look back in the past ...

The Vietnamese Government is on the right track. Viet Nam has adopted the OECD principles. Decree 20 on transfer pricing has been deployed for more than a year. The Vietnamese Government will have a more appropriate approach to this issue. I would like to emphasize that transfer pricing is not a tax evasion. I recommend that Viet Nam continue its recent efforts, particularly the application of Decree 20 and the Circular guiding the application of the OECD Principles. We need to have concrete and careful steps. The determination of the transfer pricing is based on the estimation method. I think that the method application of prior agreement on taxable price plays a very important role. And the multinational companies are keen to adopt this approach.

Thank you, Sir!

By Thùy Linh (recording)/ Binh Minh