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Vietnam’s Ministry of Finance has put forward proposals to reform foreign direct investment (FDI) policies in an effort to combat transfer pricing and tax evasion, according to reports from February 20.
The proposed changes reportedly stem from a report prepared by the ministry, which was submitted to Vietnamese Prime Minister Phạm Minh Chính and Deputy Prime Minister Hồ Đức Phớc.
The Ministry of Finance emphasized the necessity for the government to conduct a comprehensive review of active FDI projects to identify those that are underperforming or showing indications of causing environmental harm.
The report analyzed financial statements from 28,918 FDI entities for the year 2023, revealing significant concerns regarding financial performance and tax compliance.
According to the ministry, more than 56% of these entities reported losses in 2023, with their collective revenues amounting to VND9.41 quadrillion (US$352 billion)—a 4.3% decline compared to 2022.
Additionally, the report found that 18,100 companies recorded an accumulated loss, raising further concerns over financial sustainability.
It was also reported that the total combined losses among FDI firms increased by 32% in 2023, reaching VND217.46 trillion.
The Ministry of Finance highlighted that many FDI firms have been consistently reporting losses for years while continuing to expand their investments. At the same time, some companies that generated substantial revenues and profits were found to be paying only minimal taxes, raising suspicions of potential tax avoidance.
In response to these findings, the ministry has proposed enhancing information comparison mechanisms as part of its broader strategy to address transfer pricing and tax evasion.
As the government considers these recommendations, further regulatory measures may be introduced to strengthen tax enforcement and ensure a fairer financial landscape for foreign-invested businesses operating in Vietnam.
By fLEXI tEAM
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