Tax department failure hurts energy project

Incompetence by the tax department is causing headaches for developers Photo: Le Toan

The AES-VCM Mong Duong Power Company Limited, the investor in the Mong Duong II BOT Power Project, has just sent a document to the Ministry of Finance (MoF) and Ministry of Industry and Trade (MoIT) raising difficulties it has faced in importing goods for construction of the project due to late value added tax refunds.

According to the company, the Quang Ninh Department of Taxation agreed to a VAT refund of VND230.29 billion ($10.97 million) in October, 2013.

The department then agreed in December last year to provide an additional VAT refund of VND137.5 billion ($6.55 million) to the company, bringing the total refunded VAT the company was entitled to up to VND367.7 billion ($17.52 million).

According to regulations on VAT refunds, companies should wait no longer than three days, but this deadline has been ignored by both the local authority and the General Department of Taxation.

David Stone, managing director of the AES-VCM Mong Duong Power Company Limited, said that the Quang Ninh Department of Taxation explained that the VAT refund had been delayed as it exceeded the department’s tax refund budget for the fourth quarter of 2013.

Therefore, the department sent a proposal to the General Department of Taxation (GDT) to supplement Quang Ninh’s tax refund spending limit.

Stone, however stressed that the late VAT refund made it difficult for the company to continue importing goods for the project due to cash flow problems caused by the delay.

“The project is now at its peak period, with construction and testing activities to be carried out which need capital to pay contractors. In November and December in particular, the company needed VND140 billion for payments,” he added.

To overcome these difficulties, while awaiting the GDT to resolve the issue, the company also proposed the GDT allow it carry on with imports without having to make VAT payment on the goods. He also asked that the company not be subject to penalties for late VAT payments.

However, this proposal was rejected by the General Department of Customs which said that this was impossible and that the company must pay tax in accordance with existing regulations, despite the department flouting its own legally specified deadlines.