VIR report scoops press award

Le Thi Thanh Ha, a reporter at Dau Tu (Investment) Newspaper - the Vietnamese version of VIR, has won a "B" prize thanks to her article named "Coca-Pepsi: surprising losses" during the 2012 National Press Awards.

The article revealed the story of taxation authority suspicions of transfer pricing at two global leading beverage producers Coca-Cola and PepsiCo, after they reported huge losses or tiny profits, but still expand investments in Vietnam.

After the article, many other newspapers, followed the story of "real profit, fake loss" suspicions of these two soft drink giants.

Even after the media’s participation in the story, there was a call for a boycott of Coca-Cola products.

"This article is pioneer in pointing out a hot matter," said Nguyen The Ky, deputy head of the Central Committee for Propagation and Training.

He added that if foreign-invested enterprises actively accepted their tax duty, the state budget would benefit millions of dollars.

The transfer pricing story of foreign-invested enterprises has been a hot topic, which not only attracted reporters' attention, but caused headaches for state managers, especially the Ministry of Planning and Investment.

Together with Dau Tu newspaper, VIR also published a series of articles regarding the topic. For the Coca-Pepsi story, in late November 2012, VIR released an article, which highlighted the irrationality of these two firms reporting huge losses or tony profits, but still rapidly expanding in the country.

The consecutively reported losses for 13 years and the beggarly profits compared with its business scale raised doubt over transfer pricing activities at PepsiCo in Vietnam.

The cumulative losses of PepsiCo Vietnam till end of 2010 were VND1.2 trillion, or $57 million at the current exchange rate, according to Department of Taxation of Ho Chi Minh City where the firm headquartered.

During 13 years, from 1994 to 2007, the firm continuously reported losses. Since 2007, the company began to report profit, however, it only made up around 2-3 per cent of its revenue.

Despite big cumulative losses and modest profit compared with revenue, PepsiCo still continued to expand its business scale in Vietnam.  

However, at least PepsiCo Vietnam has reported profits in recent years. Its biggest rival, Coca-Cola which operating three plants in Ho Chi Minh City, Hanoi and Danang, has never reported a profit in Vietnam.

 Coca-Cola’s cumulative losses in Vietnam were $181 million till September 30, 2011 which was even bigger than its equity of $141.8 million, according to Ho Chi Minh City Department of Taxation. Minh said Coca-Cola Vietnam had blamed high prices of materials exclusively provided by its parent company for the loss.

 Still, like PepsiCo, Coca-Cola still expands investment in Vietnam. Last month, Muhtar Kent, chairman and chief executive officer of Coca-Cola, announced to invest additional $300 million to Vietnam in next three years, bring its total investment capital in Vietnam to $500 million.