The Ministry of Industry and Trade has drawn attention to a sudden spurt in the trade deficit run up by foreign firms, and urged relevant agencies to investigate the reasons.
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In the first five months, excluding USD3 billion from the oil exports, they had racked up a deficit of USD1.6 billion, Deputy Minister of Industry and Trade Nguyen Thanh Bien told a recent meeting.
The average whole-year deficit is only USD2 billion before 2009.
Thoi Bao Kinh Te Sai Gon (The Saigon Times) quoted Bien as saying that the deficit had jumped last year to USD2.7 billion and to USD1.6 billion in just the first five months this year.
The Government\'s opening of the domestic retail market under World Trade Organisation commitments is one of the main reasons for this since this allowed foreign companies to import and directly sell in the country.
Economist Pham Chi Lan said misuse of transfer pricing – the nominal prices companies report when buying or selling from their overseas units – to evade taxes could be another reason.
More than two-thirds of foreign firms have consistently been reporting losses in recent years while Vietnamese firms of the same size in the same industry have been profitable at home and abroad, she said, adding "this is bizarre."
Le Thi Thu Huong, deputy director of the Ho Chi Minh City Tax Department, conceded that the global economic downturn made life difficult for businesses in Vietnam. However, the Government allowed tax deferment to help them during the tough times, she pointed out.
But some FIEs are believed to take advantage of transferring pricing to shift their revenues and profits to markets where taxes are lower than in Vietnam. Many FIEs imported machinery and materials from their parent company abroad at high prices but sold their finished products at prices below market level, she added.
The lack of support industries – and thus the need to import feedstock – was also a cause for the trade deficit, another ministry official said.