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EVN responds to tax evasion claims

Released at: 17:36, 30/12/2017

EVN responds to tax evasion claims

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Power monopoly refutes claims from MoF it has been falsely reporting costs and profits.

by Duy Anh

The Ministry of Finance (MoF) is demanding more than VND1.9 trillion ($85 million) in tax arrears from the State-owned Electricity of Vietnam (EVN) after inspectors discovered it had been falsely reporting costs and profits.

The power monopoly failed to declare a profit of more than VND4.8 trillion ($213.7 million) it made on the forex market in 2016, MoF’s inspection found.

It also listed a $60 million pipeline project in its 2015 expenses, despite the fact the Ministry of Industry and Trade (MoIT) had instructed the company to divide the cost over at least two years.

The ministry said the cost allocation has affected power prices, without specifying how.

In its response, EVN said in a statement sent to local media on December 28 that the massive profit it made on the forex market came from a coal-fired thermal power plant that belongs to one of its power generation affiliates.

Funded by the Japan International Cooperation Agency (JICA), management of Nghi Son 1 Thermo Power Plant would only be transferred to Power Generation Corp. 1 (Genco 1) after construction is completed, according to JICA’s request. Accordingly, EVN has continued being the investor of the project since 2013, with approval from MoIT.

EVN, citing the Prime Minister’s approval of the group’s restructuring plan during 2017-2020, including the transfer of management of Nghi Son 1 to Genco 1, said the project belongs to the power generation company and therefore the massive profit it made on the forex market must be reported by Genco 1.

“Currently, EVN is completing procedures to hand over the management of the plant to Genco 1 on December 31,” according to the statement.

It added that the cost allocation in 2015 instead of 2017 was an effort to save costs to reduce pressure on power retail tariffs, and the group is continuing to communicate with MoF to resolve the issue.

EVN, which also invests in power facilities, finance and labor training, is famously known for claiming losses when asking for permission to raise prices.

On December 1, it raised retail power prices by 6 per cent, a decision that came amid the peak year-end production season and with little advanced notice. It also raised retail prices by 7.5 per cent in March 2015 and wholesale prices by 2-5 per cent in May 2016.

Mr. Nguyen Manh Hung, Deputy Head of Vietnam’s consumer rights group Vinastas, called the latest price hike a “surprise” that consumers were completely unprepared for. “It’s not fair that the supplier gets to dictate the prices and the customer doesn’t get a say,” Mr. Hung said.

EVN is also Vietnam’s largest debtor, owing early VND487 trillion ($21.5 billion) as at the end of 2016, according to a government report issued last October.

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