Erasing tax debts: Developing a strict mechanism for inspection and supervision

	Ho Chi Minh City: Nearly a hundred businesses owe billions in taxes
	Ho Chi Minh City: Focus on handling outstanding debts and preventing budget revenue losses
	Tax sector strives to keep the tax debts in 2018 to not exceed 69,000 billion VND

The draft Resolution on erasing tax debt continues to be consulted with the intention of removing more than 27,700 billion dong of tax debt. Photo: Thuy Linh

The burden of tax debt

According to tax authorities, thanks to drastic and synchronous measures, the tax debt collection has increased over the years. Mr. Phi Van Tuan, Deputy General Director of the General Department of Taxation stated, “On average from 2011 to 2017, 81% of recoverable debts were collected; the average growth rate was 16.3%/year. The proportion of total debt on domestic revenue has dropped sharply from 12.2% in 2014 to 7.6% in 2017, and reached 7% by the end of 2018,”

The debt collection increased, but the tax debt continues to be a "burden" to the tax sector because the total tax debt amount as of December 31, 2017 was 78,466 billion VND, reducing only 2.8% (2,261 billion VND) compared with December 31, 2016.

Of which, the debt managed by the tax agency was 73,145 billion VND (the amount of irrecoverable debts accounted for 31,469 billion VND). The debt managed by the Customs was 5,320 billion VND (the irrecoverable debts was 3,834 billion VND).

According to Mr. Phi Van Tuan's explanation, there were many reasons for the fact that the irrecoverable debt accounted for a high proportion in debt structure. First, some taxpayers were considered dead, missing, and incapable of civil acts with a total tax debt of 247.5 billion VND, accounting for 0.3% of total outstanding debts. Second, there were 14,816 enterprises that had dissolved, but they did not carry out the dissolution procedures according to regulations with the outstanding debt of 1,485 billion VND; 256 insolvent enterprises leading to bankruptcy, but they did not carry out the bankruptcy procedures as prescribed with the outstanding debt of 688 billion VND; there were more than 620,000 taxpayers (including businesses, households and individuals) who were no longer doing business, not using the business address registered with the tax agency, with the outstanding debt of 21,846 billion VND.

Currently, the Law on Tax Administration stipulates the amount of late payment is 0.03%/day on the amount of late payment. Although this provision is a necessary remedy, but because taxpayers who are considered dead, missing, self-dissolved or bankrupt are unable to pay taxes, the amount of late payment is increasing over time. According to the General Department of Taxation's calculation, the total amount of late payment is up to 12,273 billion VND on the accounting books of the tax authorities, but in fact it cannot be recovered.

"The Law on Tax Administration was built 10 years ago and has been supplemented and amended many times. However, cases of handling tax arrears have not yet covered the actual situation due to many force majeure reasons, as well as not yet reflecting the reality of tax administration,” said the leader of the General Department of Taxation.

The budget revenues and expenditures are not affected

On the basis of the cases expected to be erased tax debts in accordance with the draft resolution, the Ministry of Finance planned to erase 7,753 billion VND. According to the Ministry of Finance, the elimination of debt would reduce the amount of tax arrears, reduce the burden of managing irrecoverable debts in the budget, and reduce costs for the State. The erasing of irrecoverable debts would help tax and customs agencies to concentrate their resources on managing and urging recoverable debts, enhancing effectiveness and efficiency in the tax management, preventing loss of revenue, increasing revenue for the budget; at the same time, making the debt data transparent, and reflecting the true nature of tax debts to build state budget revenue and expenditure estimates, macro-economic indicators.

The Ministry of Finance also affirmed that basically, the issuance of the resolution would not affect the budget revenues and expenditures, and would not change the major state budget balances. Although these debts existed but there were no objects to be collected, unable to be collected and the annual revenue estimates for these debts were not carried out.

According to Mr. Nguyen Duc Hai, Chairman of National Assembly Finance - Budget Committee, in recent years, the National Assembly has amended, supplemented and issued many laws on tax and tax administration, leading to many changes in tax policy, however, there have no specific and effective regulations on handling outstanding tax debts.

"A resolution on this issue aims to institutionalize timely the guidelines and views of the National Assembly and the Government on tax administration laws in general and the law on tax debt management in particular to handle late payment and late payment fees, to remove financial difficulties for enterprises arising tax debts due to force majeure causes; to handle long-term irrecoverable debts because taxpayers have gone bankrupt and failed to comply with bankruptcy procedures according to law, or taxpayers have stopped doing their business,” said Mr. Nguyen Duc Hai.

Giving suggestions to build a draft Resolution, Ms. Nguyen Van Chi, Standing Member of National Assembly Finance - Budget Committee said that the long-term irrecoverable debts were causing difficulties for management. Therefore, it was necessary to implement debt elimination soon, on the one hand to reduce the burden on the budget, on the other hand, to help tax administration agencies to focus on other tasks instead of spending time on the irrecoverable debts.

Erasing tax debts can be said to be a "sensitive" task. If approved, the implementation of the resolution will have an impact nationwide, therefore, it is necessary to have the direction, participation of the committees, local authorities to check and closely monitor the handling of tax debts by the competent authorities to ensure the public, transparent and exact debt handling with the right objects, ensuring strictness, and not letting the state budget be lost.

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Moreover, Ms. Vu Thi Luu Mai, Standing Member of National Assembly Finance - Budget Committee also suggested that there should be strict regulations to ensure that erasing debt is transparent, open and fair. Moreover, there should be a mechanism for inspection and supervision of implementation, because this is an important issue directly affecting the budget revenue.