Difficulties in e-commerce management

VCN- At the 2018 Electronic Commerce (E-commerce) Forum held in HCM City last week, the experts said that Vietnam needs to make changes to the policy framework, especially the Tax policy to be able to strictly manage e-commerce in the context of its amazing growth in the current period.
difficulties in e commerce management
Submitting personal income tax online at the HCMC Tax Department. Photo: Ng.Hue

Difficulties in management

According to VECOM, the growth rate of e-commerce in Vietnam in 2017 is over 25%, which is expected to remain in the next three years. However, Mr. Nguyen Huu Tuan, Head of the E-commerce Management Department, Vietnam E-commerce and Digital Economy Agency, Ministry of Industry and Trade, said that in 2017, this unit punished more than 300 violations with the total over 6 billion VND in the e-commerce section. In comparison with 2016, the violations increased by 67% in cases and 33% in fines.

Mr. Tuan pointed out some common violations in the e-commerce field. Specifically, many enterprises do not inform and register with competent state agencies when selling or providing services on a website. In addition, many websites do not or wrongly provide customers with full information such as delivery, payment, return goods…policies. Many websites also make mistakes in contracts when using the online ordering function.

Some websites even falsify the information of other businessmen, organizations or individuals in order to participate in e-commerce activities; cheat or provide untrue information when registering on websites, or forge registration information. Some e-commerce trading floors are limited in both awareness and human resources to control and prevent illegal trading on their floor, therefore violations still occur. Along with that, there are some violations of online promotion, protection of consumer rights that are related to the responsibility of the seller, such as exchange and return of goods, warranty, wrong delivery, slow refund... affecting the consumers’ interests.

Similarly Mr. Tuan, Ms. Manh Thi Tuyet Mai, Head of Corporate Income Tax Department, Policy Department - General Department of Tax shared many difficulties of tax authorities in the e-commerce management. In particular, the issuance of business licenses still encounters problems due to the fact that e-commerce activity or some e-commerce activities are not in the list of business lines. The popularity of paper invoices is also a major difficulty for tax authorities. Currently, the number of registered companies using e-invoices is very low, and there is no link between electronic invoices and tax authorities, which makes it difficult to determine the turnover of business units.

Ms. Mai stated that the tax section is studying e-bills project, which is expected to be submitted to the Government in 2018. It will encourage 100% of businesses to use electronic invoices and connect with tax authorities to conveniently give trading information and avoid using fake invoices.

The tax authorities also have difficulties in identifying the exact nature of transactions for tax purposes in e-commerce. "Typically, the precise determination of Grab's and Uber’s business is still controversial. According to the Taxi Association, this is a business of technology transportation. However, according to the Ministry of Transport this is a kind of transportation contract. The difficulty in determining the exact nature of the business creates difficulty for the tax authorities to impose tariffs on Grab and Uber,” she said.

The collection of foreign contractors' tax on cross-border transactions is also facing difficulties because these foreign organizations are not present in Vietnam, but they provide services and get income in Vietnam. Along with that, is the difficulty in managing sales activities on websites and social networks providing digital product services. For example, many businesses sell or advertise on websites, social networks but do not invoice or fully declare their turnover to the tax authorities.

Need to modify many tax laws

For tax administration in the development of e-commerce, Ms. Mai stated that in the immediate future, the tax authorities are conducting propaganda and dissemination of tax policies, encouraging organizations and individuals to fulfill tax obligations. Typically, the Tax Department of Ho Chi Minh City has held meetings with thousands of business accounts on Facebook to mobilize these account holders to do tax declarations.

Together with that, in order to effectively manage tax, the General Department of Taxation is amending and supplementing some provisions of the VAT Law, the CIT Law, the PIT Law, the Export-Import Tax Law and the guiding documents to ensure the coverage of all e-commerce business subjects and forms in Vietnam. The General Department of Taxation is assigned to develop the revised Tax Administration Law. The General Department of Taxation also proposed some measures to ensure the enforcement of tax administration. Specifically, the revised Law on Tax Administration is expected to contain a chapter on electronic transactions, which specifies e-commerce activities to ensure the feasibility of tax administration in this area. At the same time, this unit will study the policies and international practices so the management of e-commerce tax will be in accordance with international practices.

The General Department of Taxation plans to set up and open an interface on the tax information portal for taxpayers to declare, register tax, as well as use electronic invoices, ensuring 100% of businesses can use electronic bills instead of the current tax declaration system. Along with that, the General Department of Taxation is going to conduct a study for establishing a department at the General Department of Taxation to review, understand the electronic commerce transactions, and for taking an initiative in training human resources for tax staff, ensuring compliance with current trends.

In addition to the efforts of the tax authorities to effectively manage the tax on e-commerce, Ms. Mai said that more solutions from relevant ministries should be added. Specifically, regarding payment, the tax sector suggested the State Bank to study for solutions so that the commercial banks can deduct taxes on the payment transactions through banks before paying out to sales organizations, especially foreign ones. At the same time, with cross-border services, the payment should be done through the domestic payment gateway of the NAPAS center; therefore the tax authorities can accurately determine the revenue for these activities.

At the forum, the experts assess that the tax authorities have a big step to make on the way to efficient e-commerce tax management. The Ministry of Finance has released a proposal draft for the development of the Law on Tax Administration (revised) which is an important beginning in e-commerce tax management. Accordingly, the E-Commerce Association recommends the business community involved in online business to actively participate in and contribute ideas to the revised draft of Tax Administration Law to ensure that the provisions in the law accommodate with the promotion of E-commerce development to get high efficiency.

By Nguyen Hien/ Ha Thanh

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