Closing the loophole of "dodging" tax from e-commerce

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Assoc. Dr. Dinh Trong Thinh

Besides strong development in recent years, e-commerce in our country also revealed many shortcomings. So in your opinion, what are the "loopholes" that people are taking advantage of to buy goods across borders via e-commerce?

With the rapid development of the internet, many technology platforms such as Google, Youtube, Facebook, even though they do not have a fixed business base in Vietnam, over the years, there have been huge revenues from the Vietnamese market. This is a relatively new and complicated issue for the Tax sector and poses many challenges for the Tax sector in correctly, fully and quickly collecting taxes for the State budget.

According to the latest data from the General Department of Taxation, on tax collection management for cross-border goods and services, the revenue from this activity through organizations in Vietnam declared and paid on behalf of tax since 2018 reached VND 5,432 billion (accumulated to June 29, 2022), the average collection rate is 130%, the average revenue is about VND 1,200 billion/year. Since 2018, 2021 is the year with the largest revenue with VND 1,591 billion (in 2018 it was VND 770 billion; in 2019 it reached VND 1,167 billion; in 2020 it reached VND 1,143 billion; in the first six months of 2022, the revenue reached nearly VND 760 billion).

However, the tax revenue from this sector is not commensurate with the revenue of domestic and cross-border business platforms in Vietnam, which can cause losses to the state budget, creating inequality among businesses.

In fact, it is not only in cross-border e-commerce that there is tax evasion, but also in domestic e-commerce with many inadequacies in management. Because businesses and individuals doing business in cyberspace are looking for "loopholes" to avoid taxes.

Businesses and individuals doing business in cyberspace often find ways to avoid taxes, and split into many different accounts for business, leading to inaccurate tax declarations and being very difficult to control. Many social networking sites originate in foreign countries and do not have a legal entity in Vietnam, causing many difficulties in obtaining information and tax collection.

Another difficulty is there are many subjects of e-commerce business activities with many transactions taking place and of a small nature, without business registration, tax registration, and unidentified business locations and business time because buying and selling activities take place continuously.

For cross-border e-commerce activities, foreign enterprises often refer to tax agreements and determine that they do not have a fixed business establishment in Vietnam, so they do not declare and pay corporate income tax. Business activities are mainly through digital applications on the internet and delivery of goods via express delivery. Therefore, tax collection faces difficulties in terms of binding mechanisms when requiring these businesses and individuals to comply with tax payment obligations in Vietnam.

That is not to mention that payment is mainly in cash, with no bills, if paying via bank, bank accounts are not registered with the tax agency.

In addition, one of the reasons leading to tax loss is due to the incomplete legal framework on the management of e-commerce activities, adequate management of taxpayers, management of revenue sources, and control of business transactions. business to manage tax collectors, and control payment cash flow.

What should we do to prevent tax loss from e-commerce activities in the near future?

Tax management in the field of e-commerce is a very new field, not only for Vietnam but also for many developed countries. Many developed countries face difficulties and confusion in tax administration for large technology platforms or e-commerce platforms. The tax system in particular as well as public management in general still has a certain lag. It should be frankly acknowledged that management tools often do not keep up with or lag behind the development of the market, including e-commerce tax collection.

Recently, with the direction of the Government, the Ministry of Finance and the efforts of the tax industry, the collection of e-commerce tax has gradually become more orderly. Documents, mechanisms and policies on taxation with e-commerce, the management of buyers and sellers on exchanges, and technology platforms are gradually being completed.

In my opinion, the launching of the Portal by the General Department of Taxation (Etaxvn.gdt.gov.vn) for overseas suppliers who do not have a fixed business establishment in Vietnam to fulfill their tax obligations and develop them.

Synchronous declaration of propaganda and support for taxpayers has shown great progress in e-commerce tax collection, contributing to increasing state budget revenue, and at the same time showing that the General Department of Taxation has gradually adapted to the management of e-commerce activities.

In addition to the tax office, it is necessary to have the synchronous participation of ministries, branches and localities, especially the system of commercial banks in the exchange of information, data collection and building the database to improve the effectiveness of tax administration for e-commerce activities. When there is a reliable source of information, the tax authority can offer effective tax management solutions in e-commerce businesses.

Along with that, the tax sector needs to invest in building specialized software tools in finding traces, and detecting and handling e-commerce transactions with fraud and tax evasion.

Thank you very much!