The state auditing agency says Unilever Vietnam should pay over $25 million in back taxes for the 2009- 2013 period. Speaking at a National Assembly session on the draft bill on Tax Administration, State Auditor General Ho Duc Phoc pointed to the Holland-backed personal care products maker Unilever Vietnam as an example of taxes overlooked by the authorities.
Phoc submitted an audit report that says Unilever Vietnam had under-declared its tax dues. The company took the case to the Prime Minister and the National Assembly’s Budget and Finance Committee. After re-examination, the State Audit concluded that the company had under-declared its tax dues by VND584 billion ($25 million).
The auditor general said the company had accepted this figure, but requested that it is not charged for late payment.
“Whether the company is fined will be decided by the General Department of Taxation, not us,” Phoc said.
However, tax department officials as well as Unilever Vietnam representatives said that the company had not accepted the above figure despite the parties having discussed the issue many times.
“The determination of the amount of tax arrears arising from errors in calculating the preferential tax rate that applies to Unilever Vietnam for its expansion activities in 2009-2013 is not related to transfer pricing,” said a representative of the General Department of Taxation.
Representatives of the HCMC Taxation Department also confirmed that the decision to collect this sum from Unilever Vietnam has been made, but has not been accepted by the company.
Unilever Vietnam denies having under-declared any tax obligation. Tran Vu Hoai, the company’s vice president of Sustainable Development and Public Relations, said the outstanding tax issue in question is “due to the differences in the stipulations of the Investment Tax Law and the Corporate Income Tax Law for the period before 2014.”
“Such differences in the stipulations of the relevant laws have led to different interpretations, causing difficulties for businesses and relevant agencies in the implementation of the laws,” Hoai said.
The crux of this issue lies in the differences that existed in terms of investment incentives between “new projects” and “expanded investment projects” between 2009 and 2013.
Then, “expanded investment projects” were only entitled to a three-year corporate income tax (CIT) exemption, and a 50 percent CIT reduction in the five following years. Meanwhile, “new projects” could enjoy a preferential CIT rate of 15 percent for 12 years, three-year tax exemption, and a 50 percent reduction over the next seven years.
Tax men and companies are divided over the definition of “new project” and “expanded investment project” as they apply to tax incentives.
Unilever Vietnam has petitioned the Government, the Ministry of Finance and State Audit to find a satisfactory solution in compliance with Vietnamese laws and international regulations.
Unilever Vietnam is not the only company that’s faced this problem. Suntory Pepsico Vietnam Beverage, GE, Piaggio Vietnam and Yamaha Motors have reportedly fought similar battles.
Hoai said the matter is being handled by the Ministry of Planning and Investment, in collaboration with the Ministry of Finance and other agencies.
In September, Prime Minister Nguyen Xuan Phuc assigned the Ministry of Planning and Investment the task of coordinating and working with the Ministry of Finance to resolve such issues for enterprises, in the spirit of ensuring non-retroactivity of the law.