There is no evidence of Coca-Cola transfer pricing: Minister

VietNamNet Bridge – Minister of Planning and Investment Bui Quang Vinh has disagreed with the opinion that Coca-Cola has been conducting transfer pricing in Vietnam, affirming that the soft drink manufacturer is innocent until proven guilty.

Vinh made the statement at the Vietnam Global Investment Forum held in Hanoi in late September, which gathered nearly 700 investors from 35 countries.

The discussion became lively when the president of Hoa Sen Group, a 100 percent Vietnamese owned business, said he was worried about the dominance of foreign invested enterprises (FIEs) in Vietnam.

The businessman said that the presence of so many FIEs means fewer opportunities for Vietnamese businesses, the majority of which are small and medium, and have weak capability. Therefore, he called on the government to apply necessary policies to protect domestic businesses.

He went on to say that when Vietnamese businesses follow the principle of transparency when doing business, many FIEs have been evading tax with sophisticated measures.

“If Vietnam cannot control FIEs, it would be better not to open the door widely to FIEs and let them come in,” he said.

The businessman cited Coca-Cola as an example. The soft drink manufacturer has been repeatedly reporting losses in the last 20 years. As a result, Coca-Cola does not have to pay corporate income tax.

In fact, the president of Hoa Sen Group was not the first person who suspected Coca-Cola of conducting the transfer pricing and evading tax.

Vietnamese taxation bodies said they found it ‘abnormal’ that Coca-Cola, which has been incurring losses over tens of years, still decided to increase its investment capital in Vietnam.

Dien Dan Doanh Nghiep quoted Le Duy Minh from the HCM City Taxation Agency as saying that Coca-Cola was among the businesses suspected of conducting transfer pricing.

“The enterprise always declares very high expenses on input materials,” he said, adding that in 2006-2007, the expenses on input materials alone accounted for 80-85 percent of the cost price.

Vinh then rejected the accusation that Coca-Cola did the transfer pricing, saying that there is no evidence showing that Coca-Cola evades tax and conducts transfer pricing.

Vinh said he has had some working sessions with Coca-Cola’s President, both in the US and Vietnam. After the working sessions, the manager of the drink group promised to adjust their policies to prove that their activities in Vietnam are transparent.

Since July, Coca-Cola has reported a profit. The head of the group has stated that from now on, Coca-Cola will make a profit.

Vinh said Coca-Cola is a large multinational group and it knows what it needs to do to optimize its operations worldwide.