Korean steel maker claims staggering losses

photo source: AFP

According to the southern province of Dong Nai’s Tax Department, where the company’s production centre is located, Posco VST sustained the losses between 2010 and 2012.

During this time the firm paid $2.3 million in the three core tax groups but has not had to pay any corporate income tax as companies operating at a loss are exempt.

The company did not respond to VIR’s requests for comment last week.

Posco is running two stainless steel factories in Dong Nai, with a combined annual capacity of 235,000 tonnes. The company first entered Vietnam when it acquired Vietnam’s Asia Stainless Steel Corporation in 2010 and renamed it Posco VST. In 2010, it started construction of its second factory capitalised at $130 million and put into operation in March of last year.

As Vietnam’s only stainless steel producer, Posco holds about 40 per cent of market share, but since 2011 has complained of being in a dire situation due to competition from Chinese, Malaysian, Indonesian, and Taiwanese stainless steel imports.

The company proposed the Ministry of Finance increase the import tax on imports from these territories  from zero to 10 per cent, which was accepted. Also, Posco last year proposed the government  apply an anti-dumping tax on imports from these territories. The government is mulling over the proposal, while stainless steel importers have voiced objection to the proposal, citing that would give Posco the opportunity to dominate the market.

Dam Quang Hung, deputy general director of private domestic firm Son Ha Corporation, which produces goods made from stainless steel, said he doubted Posco’s reported losses given its trade with companies from South Korea. “It brings up the issue of transfer pricing, a very relevant problem that tax and customs departments are trying to thwart,” he said.

Dong Nai’s Tax Department said that Posco VST had related-party  transactions but that it had not yet found evidence of transfer pricing. The department announced that it would continue looking into the matter.