Amendment of the Law on Tax Administration: Decentralization of authority on debt cancellation

Over the past time, the entire tax branch has reviewed, classified types of debt and debt age. Photo: T.L.

Unable to delete the debt due to the regulations

According to the latest statistics of the General Department of Taxation, the total amount of tax debt managed by the Department of Taxation is estimated at 302,961 billion VND as of September 30, 2018. This amount increased by 9,817 billion VND compared to December 31, 2017. Of which, the 90-day and over 90-day tax debt is 48,019 billion VND (increasing by 15.1% compared to December 12, 2017); for tax debt of taxpayers who have died, gone missing, lost their capacity for civil acts, related to criminal liability, dissolved, went bankrupt, terminated their production or business activities and no longer operated at business registration address (irrecoverable debt) is 34,942 billion VND, accounting for more than 42% of total debt, increasing by 3.473 billion VND compared with December 31, 2017.

According to representatives of the General Department of Taxation, over the past time, the entire tax branch has reviewed, classified debts and debt age; applying coercive measures and disclosing tax debt information; strengthening coordination with local authorities in urging the recovery of tax debts. However, the fact that, compared with the time December 31, 2017, tax debt is still tending to increase.

The reason for this situation is partly that over the years, the world economy in general and Vietnam in particular, has encountered many difficulties in trade competition. In addition, there are taxpayers, especially new business enterprises that lose money by dissolving, bankruptcy, leaving their registered business addresses without paying tax arisen into the state budget, resulting in increased tax debt.

On the other hand, it must be admitted that the management of tax debt is still difficult due to the current policy. Mr. Cao Anh Tuan, Deputy General Director of the General Department of Taxation, said that the current tax law stipulates that in case of late payment of tax compared to the prescribed timeline, it will be fined 0.03%/ day of the payment, including the taxpayers who are no longer subject to collection, deceased taxpayers, missing, or lost his/her capacity for civil acts; taxpayers that have left their business addresses registered with business registration agencies, enterprises waiting for dissolution, enterprises with insolvent debts and business registries that have withdrawn their business registration certificates. These regulations lead to the increase of the late payment of unpaid taxpayers.

“In fact, this debt is still in the tax records of the tax office, but it is a virtual debt, putting pressure on costs and human resources for the tax authorities to monitor and manage tax debts,” the director of the General Department of Taxation said.

In addition, even if it is impossible to recover, it is not easy to delete this debt with current regulations. Specifically: For tax debts which have been overdue for 10 years that the tax administration agency has applied all coercive measures, tax debts will be cleared. However, so far, no case is eligible for tax relief because it is not feasible.

In order to explain the impossibility, the representative of the General Department of Taxation took an example, a case that the business owes tax for more than 10 years but cannot delete the debt because it does not meet the condition that “applies all coercive measures”. This is because the enterprise has been approved by the Department of Planning and Investment to dissolve and have its business registration certificate withdrawn before the tax office has taken enforcement measures. On the other hand, the tax authorities have also failed to implement measures to enforce asset declaration because when enterprises have tax debts, most of the assets have also been mortgaged at banks.

4 levels of authority has right to remove tax

In order to improve the effectiveness of debt management and tax debt enforcement, the draft of Law on Tax Administration (amended) adds a regulation for charge-off, late payment; procedures, dossiers, competence of charge-off. Accordingly, some cases are charge-off, late payment such as: Taxpayers are individuals who have died or are legally considered dead, missing or lost their civil act capacity; taxpayer had decision to dissolve to the tax administration agency and the business registration agency for carrying out dissolution procedures, the business registration office has notified the taxpayer who is carrying out dissolution procedures on the national portal about the business registration but the taxpayer has not completed the procedure for dissolution...

An another case of charge-off or late payment is taxpayers who have been requested by competent agencies to revoke: business registration certificates, license for establishment and operation; or who have been revoked business registration certificate or establishment and operation license.

Mr. Cao Anh Tuan also said that the draft Law on Tax Administration (amended) has added provisions for debt relief for the owners of private enterprises who have died. This is a new point in the Law on Tax Administration (amended), as the current law only provides for the debt relief of individuals who have died. Another new point is that the authority to remove tax debt is regulated by 4 levels.

The Prime Minister has the right to delete the debt if the taxpayer has a debt of 10 billion VND or more; The Minister of Finance has the right to cancel the debt if the taxpayer has the amount of tax debt less than 10 billion VND; The General Director of the General Department of Taxation and the General Director of the General Department of Customs have the right to remove debts in the case where taxpayers have debts under 5 billion VND; The tax department director and the director of the Customs Department has the right to cancel the debt for cases where taxpayers have debts of under 1 billion VND.