Customs handles tax debt: flexibly and rigorously- Part 1: Diversity of tax debts

VCN - According to Article 55 of the Law on Tax Administration 2019 stipulating the tax payment deadline, enterprises are allowed to apply for a 90-day grace period when importing and exporting taxable goods.
Enterprise owes more than VND 1 billion in tax, director was temporarily suspended from exiting the country Enterprise owes more than VND 1 billion in tax, director was temporarily suspended from exiting the country
Classifying tax debts to develop appropriate solutions for each Classifying tax debts to develop appropriate solutions for each
Two companies’ owners suspended from exit for owning tax debts Two companies’ owners suspended from exit for owning tax debts
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Customs officers at Hai Phong Customs Department. Photo: T.Binh

Many enterprises have abused this policy to commit tax fraud and evasion, causing revenue loss. This is one of the main reasons why the number of bad debts managed by Customs increases every year.

To effectively prevent tax evasion, the Customs sector has advised and coordinated with other agencies to develop many solutions and processes. Customs News introduces a series of articles on the handling of tax debts in the customs sector.

Customs officers at Hai Phong Customs Department. Photo: T.Binh

The list of tax debtors named by customs in the media is being expanded, there are enterprises that have delayed payment for many years but the customs office cannot collect their debts for a number of reasons.

Thus, the General Department of Customs has developed many measures to manage and recover tax arrears.

Big tax debtors

In 2022, according to the General Department of Customs, units in the customs sector took the initiative and efforts in urging, recovering and handling tax debts; monitored, reviewed and grasped the tax debt situation for enterprises in their areas, classified groups of recoverable and unrecoverable debts for handling according to regulations.

At Lang Son Customs Department, as of December 31, 2022, the total amount of overdue tax debts for approved customs declarations is VND184.3 billion. Of which, bad debts subject to freezing and writing-off are VND 180.78 billion; recoverable debts are VND2.5 billion; debts for administrative fines are VND0.68 billion.

Many enterprises have been "named" many times, but so far most of them have stopped operating, fled and owed debts for more than 10 years, even nearly 20 years.

Most recently, Nghe An Customs Department has released a list of 56 enterprises in the province with a tax debt of over VND42 billion. Most of the debts arose from 2012, meaning that they are over 10 years old and are unable to be collected.

In the area managed by Ba Ria - Vung Tau Customs Department, as of November 15, 2022, the unit recorded more than VND198 billion of tax debts, an increase of VND93 billion year-on-year.

Of which, more than VND95.3 billion are bad debts; more than VND1.76 billion are pending debts; more than VND79.9 billion are recoverable debts; and debts for administrative fines are more than VND21.5 billion.

Typical enterprises with high indebtedness are Royal Ceramic Co., Ltd (more than VND29.7 billion); High-class Construction Slab Co., Ltd (more than VND11.8 billion); Metacor Vietnam Co., Ltd (nearly VND 6.8 billion); Viet Tan Phat Co. Ltd (more than VND5.5 billion); and Phuong Khanh Automobile Co. Ltd (more than VND4 billion).

Most of the tax debts are bad debts; some enterprises owe tax for up to 10 years. Although Ba Ria - Vung Tau Customs has sent documents as well as directly met with representatives of enterprises to urge them to make the payment, the enterprises have given many reasons to delay debt payment.

In the area managed by Ho Chi Minh City Customs Department, the Investment Customs Branch had to issue a coercive decision by stopping customs procedures for import and export goods of Industrial Construction JSC, address at 146 Nguyen Cong Tru Street, Nguyen Thai Binh Ward, District 1, Ho Chi Minh City from August 24, 2022 to execute the content of Official Dispatch No. 9684/CTTPHCM- QLN dated August 12, 2022 of Ho Chi Minh City Tax Department for having an overdue tax debt of more than 90 days from the deadline as prescribed, with a total amount of over VND280 billion.

Many enterprises with huge tax debt from several billion to several tens of billion VND were enforced by stopping customs procedures. Previously, the Investment Customs Branch issued a decision on enforcement by stopping customs procedures for import-export goods of Timatex Co., Ltd, address Lot 80, Street 1, Linh Trung 2 Export Processing Zone, Binh Chieu Ward, Thu Duc City, Ho Chi Minh City, for tax debt more than 90 days from the prescribed payment deadline with the amount of VND72 billion.

In addition, there are countless businesses that are trying to "ignore" their tax debts such as Saigon Development and Investment JSC, address: An Phu ward, district 2, Ho Chi Minh City, with a tax debt amount of VND 404.5 billion; Housing Development and Trading JSC owes VND351.8 billion; Saigon Zoo and Botanical Garden Co., Ltd owes VND 339.3 billion; and Duc Khai Joint Stock Company owes VND334.3 billion.

To evade tax obligations to the state, Hoang Khang Group JSC, located in Ward 3, District 5, Ho Chi Minh City, performed acts of spreading property, running away with the coerced debt amount of more than VND3 billion. At the beginning of November 2022, Hiep Phuoc Port Customs Branch (HCMC Customs Department) decided to enforce the company by stopping customs procedures for import and export goods.

On December 12, 2022, due to overdue tax debt of over VND47 billion, Ho Chi Minh City Tax Department asked the Customs to apply coercive measures to stop customs procedures for import and export goods of Asanzo Group JSC.

In addition, at the request of Ho Chi Minh City Tax Department, the Investment Customs Branch (HCMC Customs Department) also issued a decision to stop customs procedures for the import and export of goods of Truong Thinh Phat Real Estate Investment JSC (Thu Duc City) for an overdue tax debt of more than 90 days since the payment deadline with a total of nearly VND97 billion.

In order to effectively prevent enterprises from delaying tax debt payment, on August 30, 2022, Cai Mep Port Customs Branch (Ba Ria-Vung Tau Customs Department) sent a proposal to the Immigration Department under the Ministry of Public Security on coordination to apply the measure of suspending exit for leaders of Oanh Nguyen Import-Export Logistics Co., Ltd. and Lunita Co., Ltd because of failing to fulfill their tax obligations. These two companies owe more than VND200 million from 2019, and 2020.

Drastic direction from all levels

The Customs sector has focused on developing a plan to handle and recover overdue debts; managed and issued enforcement decisions to collect debt, and met the social justice goal among taxpayers in fulfilling their obligations to the state budget.

Local customs departments have also closely monitored debts; regularly reviewed the results from implementing debt collection and coercion measures and combined many measures to urge tax debt payment from the time a new tax debt arose and repeated the payment.

According to the leader of the Import-Export Tax Department, the General Department of Customs regularly inspects and urges local customs departments to collect tax debts on the basis of examining the classification of debt groups to issue decisions on assigning debt collection targets to each local department; direct the units to review debt groups, handle all existing debts and prevent new debts.

When the Covid-19 pandemic was under control, the General Department of Customs developed a plan, assigned targets for handling overdue tax debts, late payment interest of tax debt, and administrative fines and late payment interest of administrative fines for overdue debts incurred before January 1, 2022 of released declarations as of December 31, 2021 for local customs departments and Post-Clearance Audit Department; and assigned responsibility for recovering and handling overdue tax debts, late payment interest of taxes, fines to each specific unit.

Most recently, to ensure the monitoring and management of tax debts, the General Department of Customs requested local customs departments and the Post-Clearance Audit Department to review and complete procedures for classifying debts according to the instructions in the process of managing tax debts and other revenues for import and export goods.

In addition, the Customs sector also deployed and urged local customs departments to complete procedures for debt writing-off for enterprises eligible with the provisions of Resolution No. 94/2019/QH14 and the Law on Tax Administration 2019.

The process of debt freezing and writing-off is carried out by the Customs in accordance with the provisions of the law, for the right subjects, the right competence; must ensure conditions, documents, processes and procedures and responsibility of relevant individuals as prescribed by law; ensure publicity, transparency, inspection, examination and supervision by competent agencies, organizations and individuals and people to create conditions to remove difficulties for taxpayers, prevent and strictly handle the act of abusing the policy to make a profit or deliberately delay in tax debt payment.

In order to effectively prevent enterprises from evading tax debts, the General Department of Customs requires local customs departments to focus on reviewing all overdue tax debts, and assess each debt, the actual status of the debtor; request the local authorities where the enterprise has registered its operation to enforce by revoking the business registration certificate of enterprises with overdue debts and applying other coercive measures such as stopping customs procedures, issuing a ban on exit, or deducting funds from the bank account.

In particular, the General Department of Customs requires local customs departments to implement strict management measures to prevent tax debts that business owners run away from their business addresses or return to their home countries (in case business owners are foreigners) and prevent failure in collecting tax debts for imported goods for export processing and production.

In addition, the General Department of Customs proposes to amend and supplement a regulation that import and export taxes must be fully paid before customs clearance. If the enterprise wants to delay the tax payment, it must be guaranteed by a credit institution for the payable tax amount and must bear a late payment interest of 0.05%/day on the amount of late payment.

The guarantee period shall be specified by the Government. At the end of the guarantee period, if the taxpayer has not yet paid the tax, or late payment interest, the credit institution must pay the tax and late payment interest. Tax debt guarantee is one of the effective solutions to reduce the current import and export tax revenue loss, said the leader of the Import and Export Tax Department.

(Part 2: Why is the effectiveness of coercive measures not high?)

By Hong Nu/ Huyen Trang

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