Vietnam's GDP grew in 2010, spurred on by a rise in exports and a loose monetary policy. However, inflation is in the double-digits and the currency is depreciating. "The economic situation is quite promising, but in the short term there are some major ...
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Vietnam's GDP grew in 2010, spurred on by a rise in exports and a loose monetary policy. However, inflation is in the double-digits and the currency is depreciating. "The economic situation is quite promising, but in the short term there are some major obstacles in the way, like the devaluation of the Vietnamese Dong," said Edwin Vanderbruggen of DFDL Mekong.
In an effort to restore macroeconomic stability, the authorities unveiled plans in February 2011 to tighten fiscal and monetary policies.
The Ministry of Finance predict the state budget revenue for 2011 will reach VND595 trillion ($28.6 billion), while expenditures are estimated to be VND726 trillion. Domestic tax is expected to be the main revenue driver, estimated at VND382 trillion. The government is aiming to collect higher taxes through improved tax enforcement and scrutiny.
There is growing concern over the country's tax debt, which totalled VND32.1 trillion in May 2011. The Ministry of Finance reported that revenue in July hit VND51.5 trillion. Vietnam's total revenue for the first seven months in 2011 amounted to VND386 trillion, 21% more than the revenue collected from the same time period in 2010.
The Ministry of Finance has clarified certain corporate tax issues including changes to the loss carry-forward rules. Any losses must be entirely carried forward over the following five years.
Many tax professionals have observed that the authorities are getting more aggressive. The number of audits is increasing, particularly in transfer pricing. "The tax authorities are becoming more aggressive and sophisticated in how they conduct audit activities," said Warrick Cleine of KPMG.
"The tax system is developing, but the interpretations by the tax authorities are very inconsistent," said a tax partner.
In light of revised regulations introduced in 2010, transfer pricing investigations are now included as a part of regular tax audits.
The authorities are paying special attention to foreign invested entities that constantly report losses. In March 2011, the Ministry of Finance announced that all foreign invested entities must provide audited financial statements to the authorities.
In August 2011, the chairman of Eurocham in Vietnam told TPWeek.com that he had been briefed that the Ministry of Finance is planning to introduce advance pricing agreements.
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