A government audit contends half of foreign firms that claim a loss while operating in Vietnam actually make a profit — often by transfer pricing to evade taxes. The Ho Chi Minh City Tax Bureau says 45% of 2,400 inspected foreign-invested firms in HCM City reported negative taxable incomes last year, and many are suspected of spreading profits and losses in illegal ways.
One strategy employed to minimize profits, and reduce or eliminate tax liability, is reporting high salaries — whereas the actual wages are even lower than those at domestic firms. A consequence: more work stoppages.
Overall, the Vietnamese government, while encouraging foreign investment, is putting more pressure on the investors to operate in Vietnam with integrity.