With Coca-ColaViệt Nam recently coming under scrutiny over tax evasion possibilities, its External Relations Director said the company’s continuous losses is a result of a series of objective causes.
Coca-Cola Việt Nam, the country’s leading soft drink manufacturer with steadily increasing sales, has never posted profits since its arrival in Việt Nam in 1994.
Coca-Cola’s cumulative losses in Việt Nam are now some US$180.6 million, even bigger than its equity of $141.6 million, according to Hồ Chí Minh City (HCMC) Department of Taxation.
Despite the steep losses, the company, currently running three manufacturing plants in HCMC, Đà Nẵng, and Hà Nội, has still continued to expand its Việt Nam operation, with its chairman cum CEO Muhtar Kent claiming during his Việt Nam trip last October that Coca-Cola will pour an additional $300 million into the country in the next three years.
Coca-Cola Việt Nam , meanwhile, attributed the losses to objective causes, and a number of other subjective ones.
“A myriad of unwanted reasons have sent Coca-ColaViệt Nam to the repeated loss status,” said External Relations Director Nguyễn Khoa Mỹ in an interview via email with Tuổi Trẻ.
With the arrival of new competitors, Coca-Cola Việt Nam has suffered reductions in its market share, and thus having to earmark a huge amount of capital for PR and marketing to protect its brand, Khoa said.
“The rising input costs, such as raw materials, power, and sugar, have also increased our products’ cost prices,” he added.
Khoa also said that the company had also hiked salaries for its employees by at least 11 percent on an annual basis.
“It’s to help the employees combat inflation,” he explained.
As for the subjective causes, Khoa said it is because of the pressures from bank loan interests and the foreign exchange rate risks for the loans in US dollars.
However, Lê Duy Minh, head of the tax inspection of the city’s tax agency, said most of the company’s loans are from its parent company.
“The short-term debt Coca-Cola Việt Nam owes to its parent company is as much as VND2.02 trillion, while loans from other sources only account for VND343 billion,” Minh elaborated.
“Hence, the debt status of Coca-Cola Việt Nam is in fact not a debt, as the money is provided by its parent company, which is in fact part of the profits the Việt Nam firm annually sends back to the parent under the disguise of raw material payment.”
Expanding means believing
Asked about the suspicion that Coca-Cola Việt Nam is engaged in transfer pricing activities, Khoa asserted that the company has been strictly following Vietnamese tax and financial laws.
“These have been proven in the audit reports over the last years,” he said.
In addressing the question why the company still expanded its operation despite the steep losses, Khoa said it is for the company to realize its future vision.
“Việt Nam is an important market in the Asia – Pacific under our development vision to 2020.
“The new financial investment in the country is not merely meant to expand operation, but also to show our faith in the long-term development potential in Việt Nam ,” he asserted.