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People register to pay tax at a tax agency |
In June 2023, the Da Nang City Police discovered violations of six establishments engaging in the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the Internet. These establishments have online sales of more than VND 223 billion but do not declare and fulfill tax obligations to the tax authorities. Many similar cases were detected across the country, especially in big cities, partly showing the current tax loss from e-commerce activities.
According to the White Book on Vietnamese E-Business, the country’s growth rate of e-commerce will reach 18 percent or equivalent to US$11.8 billion in 2020 and it is the only country in Southeast Asia with a double-digit e-commerce growth rate.
In 2021, although Vietnam's economic growth is only 2.58 percent, the lowest in the past 30 years, e-commerce still maintains a stable growth rate at 16 percent with retail revenue of $13.7 billion. The percentage of consumers shopping online in Vietnam is 49 percent and Vietnam ranked second in Southeast Asia, only behind Singapore.
The General Department of Taxation officially operated the e-commerce portal to receive information about organizations and individuals doing business on the e-commerce trading floor on December 15, 2022. Up to now, the e-commerce portal has recorded 333 e-commerce trading floors providing information, in which there are many exchanges with large market shares such as Shopee, Lazada, Sendo, Voso, and Tiki.
Fifty-seven foreign commodity and service suppliers including major suppliers in the world such as Google, Apple, Facebook, Netflix, TikTok, and Microsoft have registered, declared and paid taxes through the E-commerce Portal. In the first 6 months of 2023, foreign suppliers paid a total of VND 3,944 billion to the state budget.
In Ho Chi Minh City, Deputy Director of the city Tax Department Nguyen Tien Dung, said that in the first 6 months of the year, the total amount of tax arrears and fines for 4,464 households businesses with e-commerce sales activities was up to VND 85 billion.
However, out of a total of 115,239 business individuals that need to be reviewed, so far, only 1,802 business individuals have worked with the staff of the tax agency according to the notice of the tax authority. These business individuals have declared taxes and the tax authorities have accumulated arrears and fines of VND39 billion. Particularly in May 2023, tax authorities collected total tax arrears and penalties of VND 10.89 billion from violating 748 business households.
According to the tax agency, the amount of tax collected from e-commerce activities is still too modest compared to the growth of this business sector. The loss of tax revenue from e-commerce activities not only reduces the budget but also negatively affects the healthy operation of the market when tax obligations are not equitably fulfilled. The more e-commerce develops, the greater the tax sector suffers tax loss.
There should be a shared database of online sellers to make sure tax collection in e-commerce activities is sufficient. According to representatives of local tax departments, one of the biggest difficulties today is the supply of data on the e-commerce activities of organizations and individuals, which mainly depends on e-commerce floors. Nevertheless, this data is presently not precise.
The coordination between sectors and agencies in collecting tax from buying and selling of goods and services on the Internet is also not easy because there is no clear mechanism, and each agency has its security principles. According to experts, one of the most feasible solutions to avoid omission and loss of tax revenue from e-commerce activities is a deduction at source. That is, e-commerce trading floors must pay on behalf of online business households when registering business on e-commerce floors.
According to current regulations, individuals with e-commerce business activities with a turnover of VND 100 million or more in a year must pay personal income tax (PIT) and value-added tax (VAT). For online sales, VAT is 1 percent and PIT is 0.5 percent, totaling 1.5 percent. This contribution is fixed, there are no deductions for expenses or family circumstances. However, an owner of a small establishment processing ready-to-eat food, mainly selling online, said that the above-mentioned regulation of VND 100 million is somewhat rigid. According to him, to make his food and drink products become popular, he had to invest in a lot of machinery and equipment, not do it manually. These investments are not deductible.
Regarding this, Deputy Director of the Tax Administration Department of Small, Medium Enterprises, Business Households and Individuals under the General Department of Taxation Ta Thi Phuong Lan said that this agency has noted the above comments and in the future and accordingly will review this floor to suit the reality when developing regulations.
In Ho Chi Minh City, to trace individuals with business activities on the e-commerce floor, the Tax Department of Ho Chi Minh City will coordinate with commercial banks to verify money transfer transaction information with social networking platforms such as Google, Facebook, YouTube, and TikTok. At the same time, the city tax authority will work with freight forwarders for e-commerce businesses to determine revenue. In the last 6 months of 2023, Ho Chi Minh City Tax Department will use data provided by customs authorities to compare with figures of 4 e-commerce businesses while inspecting the establishments to take measures against tax loss.
