"It is unacceptable for businesses to failure to fulfill their tax obligations"
At the trial on November 27, the Ho Chi Minh City Court rejected the lawsuit of Coca-Cola Vietnam Beverage Company Limited, while upholding the decision to collect and fine more than VND 821.4 billion of the tax authority. According to information from the Tax Department, the lawsuit arose from the decision to collect and fine Coca-Cola more than VND 821 billion, because the enterprise did not declare and fulfill tax obligations in accordance with tax law and related laws, causing losses for many years.
This decision is based on the results of a comprehensive inspection that has lasted since 2019, comparing Coca-Cola's operations records in the period 20072015. The tax authority determined that the previously declared losses of enterprises need to be adjusted, "reducing losses" of more than 762 billion VND, and at the same time collected more than 471 billion VND in taxes, fines and late payment fees with a total amount of more than 821.4 billion VND.
During the dispute, Coca-Cola repeatedly affirmed to fully fulfill its tax obligations and comply with transfer pricing regulations. However, the conclusion of the tax authority shows that there are still expenditures that are considered inappropriate or cannot be proven to be reasonable when accounting for costs. The representative of the People's Procuracy said that the decision to collect and impose a fine by the tax authority was well-founded and suggested that the court reject the lawsuit.
On the side of Coca-Cola Vietnam, the enterprise said it respected the trial process and decisions of the Ho Chi Minh City People's Court in resolving tax-related issues. The court's ruling means Coca-Cola must fully fulfill its budget payment obligations.
From the above incident, the Tax Department warned domestic and foreign enterprises: complying with tax laws is a minimum obligation; it is unacceptable for enterprises to continuously declare losses and not fully fulfill tax obligations. This is also a message affirming that all businesses investing in Vietnam must fulfill their tax obligations accordingly, no one is outside the law.
Enterprises have suffered losses for many years but still expand the scale of investment capital
The Coca-Cola case is considered a big lesson for the business community, as many corporations and businesses continue to expand their business but report prolonged losses.
Coca-Cola Vietnam's financial data shows strong revenue growth but profit decline, accumulated losses continue. However, this situation is not unique in the FDI enterprise sector.
According to the report of the Ministry of Finance, the number of FDI enterprises reporting losses, accumulated losses, and loss of equity has increased significantly in both quantity and value. Many businesses have reported continuous losses for many years but are still expanding the scale of investment capital and production and business activities.
As of the end of 2023, there were about 28,918 FDI enterprises nationwide, 16,292 enterprises reported losses, accounting for more than 56%; the number of enterprises recorded accumulated losses was 18,140 enterprises, up 15%; the number of enterprises recorded losses in equity was 5,091, up 15.2%; the number of enterprises reported losses in 2023 was 217,464, up 32%... Thus, the number of enterprises reported losses, accumulated losses, and losses in equity still tended to increase for many years.
The data also shows that the total assets of the controlling FDI sector reached more than VND 9,957,039 billion, up 6.8% over the previous year; equity and investment capital of owners all increased, but after-tax profit decreased by nearly 16%, leading to a sharp decrease in budget contribution.
From the figures given by the Ministry of Finance, the phenomenon of more than half of FDI enterprises continuously reporting losses is causing doubts, especially in the context of many enterprises still increasing revenue but narrowing profits.
Associate Professor, Dr. Dinh Trong Thinh - Academy of Finance - commented that this is an interesting and unusual number. He said that there is no reason for a business enterprise to suffer continuous losses but still strive to expand production and business, so it is impossible not to think about price changes or the situation of "fake losses, real profits".
Need for a selective FDI attraction and management model
According to Mr. Nguyen Quang Huy - CEO of the Faculty of Banking and Finance, Nguyen Trai University, the situation of FDI enterprises continuously reporting losses is a not-so-repeat phenomenon in the global value chain, where each group has a strategy to allocate profits between markets.
Mr. Huy said that when the phenomenon of long-term losses occurs, management agencies need to pay attention to signs such as: Sharp increase in input costs; large but difficult-to-venibilize copyright and internal service fees; the internal loan model creates high interest costs; the difference between accounting profits and real cash flow; or low profit margins despite increased revenue over many years.
These factors do not confirm that businesses are violating, but are a signal for authorities to strengthen analysis according to international standards, ensuring fairness between domestic and foreign businesses.
From the above reality, Mr. Nguyen Quang Huy believes that Vietnam needs to transform the FDI attraction model to a more selective direction, focusing on three main orientations.
First, prioritize high-tech capital flows such as semiconductors, AI, green technology, R&D centers and digital economic sectors, in order to turn Vietnam from a "workshop" position to a "high value center".
Second, preferential policies must clearly include conditions on technology, R&D, transfer, environmental standards and compliance with tax obligations, according to the principle of "if you are transparent, you will receive more".
Third, Vietnam needs to improve management standards according to international practices, implement BEPS standards (anti-erosion of tax facilities and profit transfers), control internal service fees, limit interest and increase big data analysis to reduce disputes and ensure fairness between domestic and foreign enterprises.
