Customs handles tax debt: flexibly and rigorously - Part 3: Difficult to collect and write off tax debts

	Implementing solutions to handle tax debts within the effective time limit
	Customs handles tax debt: flexibly and rigorously- Part 1: Diversity of tax debts
	Enterprise owes more than VND 1 billion in tax, director was temporarily suspended from exiting the country

Customs officers at Vung Ang port border gate Customs Branch guide businesses on customs procedures. Photo: H.Nu

Dead person is also not eligible for tax debt cancelation

To curb tax debt to the lowest rate, the Customs authority has applied many measures to completely handle the situation of bad debts, however, it is difficult to collect and write off bad debts.

Typically, Lang Son Customs Department is stuck with the debt cancellation dossier of Duc Tra Co., Ltd which owes over VND8.4 billion of tax from tax assessment after clearance by the Post-Clearance Audit Branch.

Lang Son Customs Department said, the debt of Duc Tra Co., Ltd. has been incurred since 2012. Lang Son Customs Department has applied many measures to urge and enforce the company to pay the tax debt such as stopping customs procedures, coercing deposit accounts, and announcing invoices that are no longer valid but still failed to recover the debt.

In 2017, the Hanoi Department of Planning and Investment issued a decision to revoke the business registration of Duc Tra Co., Ltd.

Lang Son Customs has also conducted verification of real estate assets, vehicles of the company and company owner, but there is no information about assets. Through the verification process, Lang Son Customs found that Duc Tra Co., Ltd was granted a business registration certificate in 2010, the owner of the company is Mr. Nguyen Canh Tuan. In 2015, Mr. Nguyen Canh Tuan signed a contract to transfer all his contributed capital at Duc Tra Co., Ltd to Mr. Nguyen Canh Phu.

The contract stipulates that Mr. Nguyen Canh Phu "enjoys all rights and obligations related to Duc Tra Co., Ltd. according to the newly contributed capital", but does not stipulate that Mr. Nguyen Canh Phu must be responsible for previous tax debts of the company.

It is worth mentioning that at the end of 2015, Mr. Nguyen Canh Phu died, the Tax Department of Dong Da district (Hanoi) where the company registered its head office announced the dissolution of the company but had not completed the procedures for closing the tax code for the company.

A representative of Lang Son Customs Department said that Article 4 of Resolution No. 94/2019/QH14 stipulates entities eligible for debt settlement. Accordingly, a taxpayer that is unable to pay the outstanding tax, late payment interest or fine that is incurred before July 1, 2020 will be eligible for debt settlement if the taxpayer is dead or declared dead, missing or incapacitated by the court; the taxpayer receives a decision on dissolution from the tax authority

However, according to the provisions of the Law on Tax Administration, the tax debt of Duc Tra Co., Ltd as of July 1, 2020 (the effective date of the Tax Administration Law) is less than 10 years, so the company is not eligible for debt cancellation. Therefore, in May 2021, Lang Son Customs Department conducted debt freezing procedures for the tax debt of Duc Tra Co., Ltd.

For the application for cancellation of late payment interest of four companies, namely Cong Nguyen Trading Co., Ltd. with a tax debt of over VND 3.9 billion; Van Minh private enterprise with a debt of over VND81 million; Thanh An private enterprise with a debt of over VND20 million and Pham Vu Furniture Manufacturing and Processing Co., Ltd with a tax debt of over VND4 million under processing by Ha Tinh Customs Department is another story.

Point d, Clause 2, Article 6 of Resolution No. 94/2019/QH14 stipulates the authority and documents, order and procedures for debt settlement: “The provincial People's Committee shall decide to cancel the debt of late payment fines and late payment interest of less than VND5 billion".

Currently, Ha Tinh Customs Department has completed the dossiers for writing off the tax debt of the above four enterprises and submitted them to the Chairman of the People's Committee of Ha Tinh province. However, the People's Committee of Ha Tinh province has requested the Ha Tinh province Department of Justice to review and advise the settlement for four dossiers submitted by Ha Tinh Customs Department.

According to the Department of Justice of Ha Tinh province, four dossiers for tax debt cancellation are complete and the debts of the four above enterprises are less than VND5 billion, so they are under the authority of the Chairman of the Provincial People's Committee, but it is noted that enterprises can open declarations at customs branches in different localities, and the total debt (late payment interest) can be up to VND5 billion, then the authority is not under the Chairman of Ha Tinh Provincial People's Committee.

The Department of Justice of Ha Tinh province said that Resolution 94/2019/QH14 only stipulates the authority to handle debt according to the proposed amount, but there is no regulation on determining the debt by administrative unit or the whole debts of a company. Circular 69/2020/TT-BTC on dossiers and order of procedures for debt settlement also do not stipulate this issue.

Take specific measures

According to a representative of the Import-Export Tax Department (General Department of Customs), tax debtors are subject to coercive measures for many reasons: deliberately delay in tax debt payment, making loss, committing fraud in business.

Many businesses owe tax for more than 30 days, the tax authority called, texted, sent emails and documents notifying coercive measures that will be applied if the taxpayer fails to fulfill the tax obligations. However, businesses deliberately delay the payment and owe tax for 91 days or more, so the authorities must apply coercive measures by deducting money from the account and blocking the account.

Even when the debt is over 121 days, the authorities apply many coercive measures such as naming businesses, stopping the customs procedures, notifying the invoice is no longer valid, revoking the business registration certificate, issuing a ban from leaving the country, but many enterprises still do not fulfill their tax obligations.

Customs officers of Post-Clearance Audit Branch, Binh Duong Customs Department at work

Facing difficulties in collecting and writing off tax debts, to reduce existing debts and prevent new debts, Customs units have focused on implementing many strong measures to effectively collect tax debt.

A representative of the Import-Export Tax Department said, Article 125 of the Law on Tax Administration 2019 clearly stipulates measures to enforce the execution of administrative decisions on tax administration. Decree 126/2020/ND-CP of the Government and Circular 06/2021/TT-BTC of the Ministry of Finance also provides specific guidance in debt management.

The General Department of Customs requested local Customs Departments and Post-Clearance Audit Department to immediately apply measures to urge debt collection to taxpayers who still owe tax, fines, and late payment interest to promptly recover tax arrears into the state budget; and review all cases where enterprises have overdue tax debts of up to 90 days to implement coercive measures to recover debts for the state budget.

Regarding the application of coercive measures, the customs authority where the enterprise owes tax must issue an administrative decision on tax administration or make a written request to relevant authorities in the implementation of administrative coercive measures.

The procedures for enforcement are guided in Chapter 2, the management process of tax debts and other revenues for import and export goods issued together with Decision 2317/QD-TCHQ of the General Department of Customs.

For the coercive measure of ceasing customs procedures, the General Department of Customs requires the customs units to issue a decision on ceasing customs procedures and post it on the portal of the General Department of Customs at least five working days before the date of application of the measure of ceasing customs clearance for import and export goods.

For the coercive measure of deducting or blocking the account, the request for a decision on enforcement shall be sent to the taxpayer subject to coercion, the State Treasury, the credit institution where the taxpayer opens the account and related organizations and individuals, together with the State Budget Collection Order on the day of issuance of the enforcement decision and post it on the customs sector’s website.

In addition, the measure of suspending exit is very effective to collect bad debts for businesses that have dispersed their assets or disappeared from their business locations.

This is also in line with international practice. However, according to the representative of the Import-Export Tax Department, although the law has prescribed "solid" measures, some customs units still have "soft" measures such as sending officials to the local area where the tax debtor has a business registration office to work with the local authority and police agency to directly urge and request the tax debtor to sign a commitment on the payment deadline.

In which, applying "flexible" measures with the basic motto of strengthening communication to raise awareness of tax law observance in general and tax payment compliance in particular; regularly and promptly urging taxpayers to fulfill their tax payment obligations; seriously implementing coercive measures to taxpayers who deliberately delay tax debt payment; creating favorable conditions for taxpayers facing objective difficulties to fulfill their tax obligations.

The representative of the Import-Export Tax Department said that the measures to collect tax debts applied by the General Department of Customs are suitable and practical. The urging of tax collection and payment by the Customs authorities is in accordance with the Law and taxpayers on the basis of the classification of tax debtors in order to take appropriate measures and apply modern information technology to tax debt management.

(Final article: Guiding specific procedures for tax debt collection)