Besides the soft drink manufacturer Coca-Cola Vietnam, which has recently come under scrutiny over suspicions of transfer pricing activities, the wholesale retailer Metro Cash & Carry Vietnam has also paid no pennies on corporate income tax over the last 11 years due to repeated annual losses. Although its revenues have increased year by year, the German retailer constantly posted losses, according to the Ho Chi Minh City Tax Department. In 2007, the company’s revenues topped VND6.6 trillion, or US$317.3 million, but the loss was VND157 billion. A year later, the revenues rose to VND8.17 trillion, yet the loss too increased to VND190 billion. Since its arrival in Vietnam in 2001, Metro only enjoyed profits in 2010, but with the losses transferred from a year earlier, the company was also exempted from the corporate income tax. The losses it reported last year were VND89 billion.Expansion cost The main cause of the repeated losses was the fact that Metro Vietnam has had to expand its system, said deputy head of the city’s tax agency, Tran Thi Le Nga. Metro planned to open 20 wholesale centers across Vietnam, and to date, they have indeed launched 19 centers in 14 provinces and cities, Nga said. The total expense to open a new Metro center can be as much as VND400 billion ($19.23 million), and with harsh competition from other retailers, it takes as long as three years to recoup investment and enjoy profits, Nga quoted a Metro Vietnam representative as saying. “Those centers with profits have to cover the losses of the newly-opened ones, but they eventually failed to afford it, thus resulting in steep losses,” Nga said. In the year to date, the accumulative loss of Metro Vietnam is VND254 billion ($12.21 million), while its initial investment was $78 million. With the permanent losses, the company had only paid value-added and excise taxes, and land leasing fees over the last 11 years. An official from the tax agency said Metro could manage to maintain its Vietnam operation thanks to bank loans from a European bank and a German financial institution.Breaching wholesale rule Metro Cash & Carry Vietnam is only licensed to operate as a wholesale retailer in the country, which means it is only allowed to serve professional customers such as hotels, restaurants, caterers, traders and other business professionals, rather than end consumers. Under this business scheme, the company only serves registered customers. But it has recently been reported that even those without registration cards can enter Metro supermarkets with ease. Tuoi Tre reporters have observed the Metro Ha Dong in Hanoi, and witnessed groups of customers entering the venue without being asked for their cards by attendants. The cashiers also accepted payments when the unregistered customers checked out. Insiders said if Metro Vietnam also operates as a retailer rather than wholesaler, it will affect other retailers in the country. “The authorities should inspect and clarify this issue to protect domestic retailers and supermarkets,” said Dinh Thi My Loan, chairwoman of the Vietnam Retailers Association.
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