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After transfer pricing scandal, Coca-Cola VN pays $20 million in taxes

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VietNamNet Bridge 16:00 | 23/10/2015

After transfer pricing scandal, Coca-Cola VN pays $20 million in taxes

This firm submitted a report of its operation in 2014 to HCM City Chairman Le Hoang Quan.

According to the report, thanks to the new investment of $300 million in October 2012, Coca Cola developed strongly and achieved positive business results in Vietnam.

In 2014 alone, the taxable profit of Coca Cola Vietnam was more than $16.6 million, doubling that of 2013 ($7 million).

"We are continuing to improve business performance in 2015 and in the following years," the report said.

The news has attracted attention as it comes after many years of the company reporting unprofitable business. 

It follows suspicions being raised against many foreign companies, including Coca-Cola, that they have been involved in transfer pricing activities. No evidence was found in this regard against Coca-Cola.

Minister of Planning and Investment Bui Quang Vinh said recently that not all enterprises reporting losses yet expanding their investment activities, as Coca Cola did, were viewed as being involved in transfer pricing.

At a press conference in July 2013, Mr. Clyde C. Tuggle, first vice president and director of Public Relations and Communications at Coca-Cola, said it was not involved in transfer pricing.

Coca-Cola first arrived in Vietnam in 1960 and returned again in February 1994 after the US removed its trade embargo on Vietnam.

Big names under suspicion of tax evasion

Many big foreign investors in Vietnam like Metro, Adidas, PepsiCo, Nike, Nestle, and Keangnam Vina are also under suspicion of committing transfer pricing.

These companies have poured a lot of money in business expansion and their products are very popular in Vietnam, but they have continually reported losses.

Speaking at the Spring Economic Forum 2015, economists Bui Trinh and Nguyen Huy Minh pointed out the paradox: though enjoying many privileges, contribution to the country’s growth of the foreign-invested sector was very low.

According to these experts, the FDI sector is taking advantage of Vietnam's preferences on tax, land and cheap labor and commits transfer pricing to dodge taxes.

However, it has been hard to prove that these firms have been conducting transfer pricing.

Linh Nhat