Management of e-commerce tax: difficulties

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Hanoi Tax Department has reviewed more than 13,000 Facebook accounts involved in sales. Photo: TL

Revenues of individuals from applications and websites significant

It is a fact that current providers of applications and products in applications such as Google Play, Apple Store, YouTube etc are developing rapidly. To manage this group, from the beginning of 2018, Hanoi Tax Department has collected information of organisations and individuals that have money from foreign organisations such as Google Play, Apple Store and YouTube. Thereby, listing 47 organisations with revenue of more than VND 78.6 billion and 526 individuals with income of more than 291 billion across Hanoi. According to Hanoi Tax Department, as of October 10, 2019, these objects have paid more than VND 15 billion tax, 131 percent of the target.

In addition, the house leasing business via websites is growing. To identify individuals having houses for lease via mediate agencies and income but failing to declare and pay tax, Hanoi Tax Department has collected information, reviewed databases and requested its branches inspect addresses of house for lease which are being advertised on websites for accommodation lease such as AirBnB, Booking.com, Agoda and Luxstay to identify income for house leasing of individuals and collect VAT and personal income tax. Accordingly, the Tax Department has requested 483 individuals involved in the house leasing business to declare and pay more than 10 billion tax to the State budget.

More than 10,000 business accounts via Facebook reviewed

Recently, a hot business type is business via Facebook. This type is quite aggressive with many different forms, especially in big cities. In Hanoi, so far, the Tax Department has reviewed more than 13,000 Facebook accounts involved in sales online. After verifying the account holders’ information, Hanoi Tax Department has deployed information about tax registration, tax declaration and payment for individuals, and posted on the website, provided the hotline to support and create the best conditions for business individuals to perform their obligations. Thereby, the Hanoi Tax Department has classified 2,000 individuals with online business activities and identified more than 1,000 accounts subject to tax registration and tax declaration (the remaining 1,000 accounts belong to organisations and individuals that have registered and are declaring and paying taxes).

Notably, during inspection of enterprises with business operations on e-trading floors, Hanoi Tax Department collected information of business individuals through these floors. Accordingly, Hanoi Tax Department has piloted at the Department (and deployed to the tax branches later), released announcement to invite 57 individuals with sales turnover of VND 600 billion to the Tax office to encourage them to declare and pay taxes. Thereby, VND 1.2 billion was collected for the State budget.

Compliance with law of taxpayers not appreciated

According to Hanoi Tax Department, through reviewing and working with organisations and individuals involved in online business, the knowledge of tax law of these objects is restricted, leading to compliance with State budget obligations being low. Moreover, the Law on communication, Law on credit organisation are restricting information to ensure national security, social orders, so information accessibility of tax agencies faces a lot of difficulties and cannot analyse on the basis of big data. Particularly, the information review of organisations, individuals involved in e-commerce business needs ministries, sectors and State agencies to be involved. However, there are not specific coordination regulations.

A tax expert also said among taxable objects, organisations and individuals involved in online business are considered the most difficult for tax management. These objects do not have specific addresses, have names registered online different from their names in real life and use cash to implement transactions. Thus, tax agencies must spend a lot of efforts and time to collect tax.

Many enterprises, business households and individuals involved in sales online get money in cash or use delivery service with authorised collection. They only use websites and social networks to advertise their products but sell products via mobile phone and message. Meanwhile, the servers hosting rental companies have not cooperated fully with tax agencies in providing full information about enterprises who are operating sales websites, making it difficult for tax agencies to collect information.

In particular, the management of contractor tax on cross-border e-commerce transactions is still a problem. Meanwhile, compliance with tax laws of e-commerce business units, via social networks is not appreciated, the current regulation on tax collection is mainly the business organisations and individuals self-declare, self-calculate and self-pay taxes to the State. Taking advantage of this regulation, most individuals and enterprises involved in online business seek to avoid taxes.

E-commerce tax administration: Taxation cannot stand alone

In the near future, the Law on Tax Administration 38/2019 / QH14 will come to force from July 1, 2020 providing for the management framework for tax administration of organisations and individuals involved e-commerce activities. Specifically, supplementing the provisions of responsibilities of ministries, sectors and units related to e-commerce business activities of organizations and individuals to tax agencies; tax registration, tax declaration, tax payment related to e-commerce business activities. Hopefully, this will be an important first step in management for e-commerce tax