HÀ NỘI — The Ministry of Finance has recently put forward a set of policy recommendations aimed at curbing transfer pricing and preventing tax evasion by foreign direct investment (FDI) enterprises. These proposals were submitted to Prime Minister Phạm Minh Chính and Deputy Prime Minister Hồ Đức Phớc, following an analysis of 2023 financial statements from 28,918 FDI enterprises.
The report revealed a decline in the performance and profitability of FDI enterprises in 2023 compared to the previous year. Total revenues fell by 4.3 percent to VNĐ9.41 quadrillion (US$352 billion), while after-tax profit dropped by 15.7 percent to VNĐ337.03 trillion. Contributions to the State budget also decreased from nearly VNĐ197.08 trillion in 2022 to VNĐ193.24 trillion in 2023.
As of December 31, 2023, 16,292 out of 28,918 FDI enterprises reported losses, a 21.2 percent increase. The number of companies with accumulated losses rose to 18,140, an increase of 15 percent, while those with negative equity grew to 5,091 enterprises, up 15.2 percent. Overall, the total loss for FDI enterprises reached more than VNĐ217.46 trillion, a 32 percent rise, with accumulated losses of VNĐ908.21 trillion and negative equity of VNĐ241.56 trillion.
The Ministry of Finance noted that while FDI capital continues to grow, it is largely concentrated on small and medium-sized projects. These projects primarily focus on manufacturing industrial products, often relying on imported components and equipment for processing and assembly. This approach typically results in low added value and medium-level technology, with companies benefiting from tax incentives and affordable labor and premises.
Key sectors such as processing and manufacturing, wholesale and retail trade, automobile and motorbike repair, and real estate, which have historically contributed significantly to the State budget, are no longer seen as primary growth drivers.
The report also highlighted a concerning trend of FDI enterprises reporting losses for several consecutive years while continuing to expand their investments, particularly in industries like processing, manufacturing, and motor vehicle retail and repair. Some companies with significant investment capital and pre-tax profits were found to be contributing less to the State budget compared to businesses with lower investment capital.
To address these issues, the Ministry of Finance has recommended that the Prime Minister direct a review of investment mechanisms and policies. This review would focus on amending or issuing timely investment policies to better manage FDI enterprises and boost State budget revenues. One key proposal is to enhance the comparison of financial data to combat transfer pricing and tax evasion effectively.
Additionally, the Government is encouraged to inspect and monitor FDI projects, especially those that are underperforming or showing signs of violations that could harm State revenues and the socio-economic environment. The ministry also proposed developing investment efficiency indicators to assess the impact of FDI projects on the economy and environment, to mitigate risks.
Another recommendation includes the issuance of a decree to establish an Investment Support Fund. This fund would help stabilize the investment environment, while attracting strategic investors and multinational corporations to Việt Nam. — VNS
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