Vietnamese boycotting Coca-Cola on the suspicion about transfer pricing

“I have decided not to drink Coca-Cola any more. I feel I need to do so. We should not accept an investor who enriches in Vietnam, but does not pay tax to Vietnam,” a doctor wrote on his Facebook.

In fact, Coca-Cola has fallen under suspicion of evading tax for the last many years because it has been continuously declaring loss over the last many years, since the day it began operation in Vietnam.

Coca-Cola’s finance reports showed that in 2004, it got the turnover of VND728 billion and incurred a loss of VND110 billion. In 2006, the turnover soared to VND1.026 trillion, but the loss was double at VND253 billion.

In 2010, Coca-Cola’s turnover was high at VND2.529 trillion, but the expenses were VND2.717 trillion, which meant the loss of VND188 billion.

As such, the accumulative loss has climbed to VND3.768 billion, which is even higher than the initial investment capital of VND2.950 trillion.

Since it repeatedly reports loss, it does not have to pay any dong in the corporate income tax.

However, the public’s anger has flamed up after local newspapers reported that on October 26, Coca-Cola announced the new investment plan of $300 million to be disbursed in the next 3 years. This is a part of the plan to exploit the Vietnamese market, where Coca-Cola can see great potentials.

Obtaining high growth, taking loss, evading tax, continuing making heavy investment are what Vietnamese have heard about Coca-Cola so far. The HCM City Taxation Department stated that it suspects Coca-Cola of making the transfer pricing and that it would put the drink manufacturer under the probe.

It is estimated that the sum of tax evaded by Coca-Cola over the last 10 years may reach trillions of dong, because Coca-Cola is holding the biggest drink market share in Vietnam with very big volumes of products consumed every year.

Vo Duy Khuong, Vice Mayor of Da Nang City, in an interview given to Tuoi tre newspaper in January 2013, said that he frankly said to Coca-Cola’s representative at a meeting that the city’s authorities won’t let it to expand business in the locality because of the behavior of conducting transfer pricing, that makes the city fail to collect tax from enterprises.

Prior to that, in late 2012, local newspapers reported that Coca-Cola has asked for the local authorities’ permission to lease another 4,700 square meters of land in the city, the land plot located next to its existing factory in Lien Chieu district in Da Nang. The drink manufacturer plans to set up another production factory on the land, a part of its plan to expand production and business in Vietnam.

Meanwhile, local newspapers have found out that Coca-Cola still has not used up the land area of 40,000 square meters allocated to it before, but it still demands more land.

The refusal by the Da Nang City’s authorities has been applauded by the public. People believe that this is a necessary treatment to the investors who only try to make profit for themselves and ignore their duty of paying tax.

Dr. Nguyen Manh Hung, Chair and CEO of Thai Ha Books JSC, has warned that by trying to evade tax by conducting the transfer pricing, Coca-Cola is “killing itself.”

“Coca-Cola seems to turn itself into another “Vedan.” Vietnamese consumers will turn their backs to its products. Meanwhile, it understands that there are many redoubtable rivals on the market,” Hung said.