Many tricks are used to fraud VAT refund

Mr Vu Manh Cuong, Director of Tax Audit – Inspection Department, General Department of Taxation

Over the past time, following the direction of the Ministry of Finance, the tax sector has closely coordinated with relevant departments in the prevention of VAT refund fraud, actively contributing to the fight against loss of state budget revenue. Could you please tell me the results of the inspection and examination after the tax refund from the beginning of the year until now?

In the first eight months of 2022, the whole tax sector carried out 4,646 cases of inspection and audit after VAT refund, equivalent to a total refund of VND 29,643.8 billion. As a result, the total amount of tax refunded and fined is VND 414.3 billion (including the refunded tax amount is VND321.9 billion, the penalty is VND92.4 billion).

Can you point out some typical tricks and behaviors that subjects have committed fraud in tax refunds?

To encourage enterprises to develop and create equality among businesses, the tax management policy gives taxpayers the right to declare, self-pay, self-register, issue and use VAT invoices;... This is the preeminent mechanism in tax administration.

However, many organizations, businesses and individuals still have committed violations of VAT refunds to appropriate the state budget's tax refund.

Through the process of tax administration, inspection and examination of tax refund activities, the General Department of Taxation found that the tricks and acts of tax refund fraud mainly occurred at the intermediary stage (F1, F2) of buying and selling goods. Enterprises in the intermediary stage, after issuing invoices to enterprise F1, then suspend their business or flee, the declaration of revenue and tax between the intermediary enterprises does not match, the selling enterprise (F2) declares small turnover, but the buying enterprise (F1) declares a significant deduction; if the payment were made through the bank, it would be verified by the tax department. As a result, the payment is made through the bank. However, the payment for goods and withdrawal from the bank both take place on the same day and in the exact name of the withdrawer.

In addition, there are cases where enterprises applying for VAT refunds use illegal invoices (purchased from enterprises without production and business activities) or use invoices of businesses that have removed their business addresses, changed the state of continuous operation in many different localities to declare and deduct input VAT and make an application for a VAT refund.

There are also cases where the enterprise prepares tax refund documents and dossiers but has no purchased goods, no warehouse, no means of transport, purchases invoices to legalize inputs or uses invoices of businesses that have abandoned their business addresses (from July 1, 2022, or earlier).

Or enterprises imported goods that were electronic components to increase the value of export shipments. When importing, enterprises declare a meagre import value. However, when other enterprises export, they declare a very high value compared to the import price, and the difference is over 50 times; meanwhile, the origin of the goods is unclear...

And there is a situation where businesses trade in agricultural products, buy raw materials at domestic business establishments and export products through border gates to China, Laos, and Cambodia... When the Vietnamese tax authority verified invoices with foreign tax authorities under the Agreement on avoidance of double taxation to collect information for consolidating tax refund dossiers, the foreign tax agency replied that there was no information on taxpayers, could not be contacted and could not find the address of the headquarters of individuals and businesses purchasing imported goods that need verification from the foreign side...

Over time, the tax sector has examined and discovered many cases of tax refund violations and recovered many billions of VAT refunds into the state budget. Typically, in some recent tax refund fraud cases, the total amount of money recovered and refunded to the state budget and late payment interest was VND 278.36 billion. As a result, the tax Authority has transferred these dossiers to the police agency following the law.

To prevent VAT refund fraud, what specific solutions will the Tax sector have to prevent and fight the acts of fraud and profiteering in VAT refund through inspection and examination?

In the future, the tax sector will continue to communicate and disseminate the tax law on tax refunds in the mass media to raise the awareness of taxpayers; coordinate with relevant agencies to recover the refunded tax amount into the state budget.

In particular, the Tax sector has built and launched an electronic invoice (e-invoice) management system. From July 1, 2022, e-invoices have been deployed to 100% of businesses, organizations, business households and individuals by following the declaration method, ensuring compliance with the provisions of the Law on Tax Administration. Furthermore, strictly managing e-invoices, and controlling information on the VAT refund status of enterprises, contributes to preventing loss of revenue in VAT refund.

The Tax Department will also strengthen the inspection and examination of VAT refunds and closely monitor the management of tax refunds, especially for some groups of high-risk items, thereby collecting information and synthesis signs of risks arising in VAT refunds. Furthermore, building and implementing an application system to support the tracking of invoice verification results at the Tax office (allowing the Tax authority to send and respond to invoice verification requests throughout the sector), speed up the verification time and gather information as the basis for verifying the origin of goods.

As for the coordination work, the General Department of Taxation will continue to coordinate with agencies such as banking agencies, customs, police, local authorities, and other countries... to implement measures to verify transactions arising on tax refund records.

Notably, the tax authority will closely coordinate with the customs authority in the information exchange of tax and customs data following the Coordination Regulation issued together with Decision No. 2413/QD-TCT towards the maximum electronification of information and data exchange steps. At the same time, they will assist in verifying the export activities of tax refund enterprises and provide a list of enterprises with high-risk export items for review and strictly inspecting when checking tax refund dossiers... Furthermore, continuing to build and upgrade the system to look up customs declarations as a basis for comparing and verifying customs declarations and verifying tax refund dossiers.