Vietnam begins price control inspections

Mar 16, 2010, 7:20 GMT

Hanoi - Government officials began inspecting sales of six commodities to determine whether their prices are reasonable, and are to punish companies deemed to be inflating them, they said Tuesday.

The commodities under inspection are cement, animal feed, fertilizer, steel, gas and sugar, said Tran Van Vuong, deputy chief inspector of the Ministry of Finance.

Vuong said both domestic and foreign companies would be subject to inspection.

The inspections come as the government adopts a new regulation on price controls that has prompted foreign businesses in Vietnam to worry about government interference in their financial operations.

Nguyen Van Nam, deputy director of the ministry's taxation department, said inspectors have begun auditing companies' books to determine whether the expenses they claimed were plausible. Companies claiming implausible expenses would be charged with understating profits and ordered to pay higher taxes.

'We will check prices of inputs and output costs, what is reasonable and what is unreasonable,' Nam said. 'For instance, if a company said they spent a certain amount on advertising, but we found it too high and not reasonable, we will not accept that deduction from the sale price, and they will have to pay tax on that money.'

Deputy Minister of Finance Tran Huy Truong said the inspections were a government effort at 'price stabilization,' driven by fears of rising inflation. Inflation in Vietnam hit a nearly 2 per cent monthly rate in February, up from 1.3 per cent in January.

The government has set a target of 7-per-cent inflation for the year.

The current inspections are taking place under the 2002 Law on Prices. Regulations from 2003 and 2008 apply that law to state-owned enterprises, but until now there have been no detailed regulations applying it to private companies.

But at a meeting Thursday with foreign businesses and trade representatives, the Ministry of Finance said it would move ahead with a controversial new circular applying price controls on a range of goods to private and foreign companies.

The circular drew protests from the European and American Chambers of Commerce and from the US embassy when it was circulated for comments in early December.

Foreign companies object to provisions forcing them to periodically provide the government with details on a wide range of expenses, including raw materials and advertising, which they consider proprietary information.