Signs of Transfer Pricing on Milk Products

One of the most obvious signs was that while the price of milk inputs in the world was up or down monthly, that of imported milk in Vietnam stayed high.

 

Since early April 2012, there has been much information about some milk firms “quietly” increasing domestic retail price. Especially after the petrol price increase, the Supermarket Association said that some milk firms requested price hikes of 5-7 percent. Do they follow the regulations when raising price?

 

According to a report released by the Ministry of Industry and Trade, the world’s price of milk input in Quarter I/2012 was generally down against late 2011, whereas there has been no sign of price decrease in the national market.

 

Commenting on this issue, Mr Nguyen Anh Tuan supposed that the decrease in milk input price in the past time has influenced the price floor. With this price decreasing trend, no enterprise has wanted to register a price increase since Lunar Tet Holiday. The price increase early this year was of those registering in late 2011.

Mr Nguyen Anh Tuan added: “Milk pricing is absolutely decided by enterprises and cannot be impacted by Governmental authorities via administrative requests. However, the price floor did not decrease visibly, but in the form of promotional programmes of milk firms. In my opinion, this form is relatively new and complicated, and should be considered by authorities to work out suitable handling measures.”

 

“Transfer pricing in milk products means that it had the price increased before being imported to Vietnam, didn’t it?” said Mr Nguyen Anh Tuan, noting that the issue of imported milk being sold at a higher price than in surrounding countries has been raised by the press for years. Especially, there is concern about the adjustment of milk price, which means it is increased before being imported into Vietnam.

 

It is a serious issue and after grasping information about comparing milk price in Vietnam and in other countries in the region, Ministry of Finance has requested customs, taxation offices and price management department to coordinate and identify whether there is price adjustment. Given the initial information, there are signs that milk price has been adjusted.

 

One of the most obvious signs was that while world milk input price rose or fell monthly, imported milk price in Vietnam stayed high. Thus, domestic price hasn’t reflected the fluctuation of the world market, but seemed to be kept still at a rate by importers. However, it cannot be confirmed but only suspected since the price management authority only caught the information based on customs declarations prepared by the enterprises.

 

Vietnam Customs has requested local customs offices to add imported milk in the list of items for management of import price risk, especially powdered milk for children under 6 years old. Therefore, imported milk price can be controlled under custom clearance to avoid loss of taxation. At the same time, there will be a database for investigation, confirmation and handling if there is any violation. Price management authorities will meanwhile provide information on registered prices to customs and taxation offices so that they can compare the registered and actual selling prices and identify transactions among joint units. These are timely actions.

 

However, it is a very difficult issue, requiring coordination among many departments such as overseas Trade Offices, Ministry of Industry and Trade, General Department of Taxation, and Vietnam Customs to update information, thereby surveys can be conducted to assess actual status and work out specific measures to prevent price adjustment over the borders, and adjustment of association or monopoly.