Panama papers trigger tax probes

Last week the General Department of Taxation (GDT) announced the establishment of an inspection team with the sole purpose of investigating the possible tax evasion and money laundering activities of Vietnamese enterprises and individuals named in the Panama Papers.

Investigations will focus on screening the tax data of those named, and will be carried out in co-operation with the investment supervisory agencies – State Bank of Vietnam (SBV) and the Ministry of Public Securities.

Anti-corruption agencies such as the Government Inspectorate and Anti-Money Laundering Administration were also asked to participate in the effort.

In order to verify the information, the GDT will conduct data exchanges with countries that have signed Double Taxation Avoidance Agreements with Vietnam.

However, the tax office’s determination to delve into these cases will certainly face a lot of difficulties.

“We understand the public’s expectation, but tax authorities have to follow step- -by-step procedures,” said Nguyen Van Phung, head of the GDT’s Large Corporations Department.

Phung explained that although inspection is the primary role of tax agencies, they still have to ensure their compliance with standard procedures. Various efforts are required to launch an investigation, beginning with the identification of the fraud risks of those involved, and ending with in-depth analyses and a draft action plan to deal with such risks.

“The Panama Papers leaks cannot be the sole reason for launching investigations,” said Phung, adding that “Being named in the papers does not necessarily imply tax evasion. Specific evidence is vital in order to address complicated violations.”

The leaks named 189 Vietnam-related individuals and companies linked with the Panama-based law firm Mossack Fonseca, through intermediaries. Those names include Dam Bich Thuy, former CEO of ANZ Bank and Nguyen Duy Hung, chairman and CEO of Saigon Securities Incorporation, among many others.

Despite the opening of the financial market as a result of global integration, Vietnam still maintains its strict control over cross-border capital transfers. For instance, the Foreign Exchange Control Ordinance states that such transfers can only be processed after declaring the cash flow’s origins and after receiving approval from authorised agencies.

However, according to a report on international capital flows of the Global Financial Integrity, Vietnam had more than $9.29 billion of illegal overseas transfers each year during 2004 – 2013, ranking 18 out of 149 emerging countries with the largest illegal capital transfers.

“The public has the right to question how such a huge amount of capital could be illegally transferred abroad, despite the Vietnamese government’s strict controls, and if those 189 entities and individuals are in any way related,” said Nguyen Khac Quoc Bao, vice dean of the Financial Faculty at Ho Chi Minh City Economics University.