Seeking overdue tax debts of enforced businesses – Final part: Recommendations for effective debt recovery

Tax debt recovery is regularly reviewed by HCM City Customs Department. Photo: T.H

Handling nearly VND800 billion in tax debt

According to the leader of the Import-Export Duty Division - HCM City Customs Department, in 2023, the HCM City Customs Department was assigned to recover VND800 billion in tax debt. As of December 31, 2023, the total amount of overdue debt arising before 2023 that is recovered and processed reached VND685.32 billion, achieving 85.10% of the assigned target.

Mr. Duong Quoc Hung, Head of the Tax Management Team, Saigon Port Area 1 Customs Branch, said that besides applying tax debt enforcement measures as prescribed in the Law on Tax Administration, in 2023, the Branch issued over 220 announcements of exit restriction for legal representatives of businesses owning tax debt. In particular, there are nearly 40 cases of businesses paying taxes after the notices of exit restriction were executed, with a total tax amount recovered of nearly 12 billion VND.

Among them, there is a typical case of T.D Trading Service and Production Private Enterprise paying more than VND4 billion; T.V Trading Service Company Limited paid nearly VND1.2 billion in debt since 2009; T.T.M Trading and Services Co., Ltd. paid over VND820 million in debt since 2010... Notably, there is a case of BRIGHT GREEN Co., Ltd., where the legal representative of the tax-debt business is fraudulent representation. She claimed that she did

"not involved, knowing nothing about the enterprise's operations under my name as director". However, after being issued a record of exit restriction at Tan Son Nhat International Airport, she went to the Saigon Port Area 1 Customs Branch to settle and pay taxes and late payment fines, with the amount money of over VND163 million and the notice of exit restriction has been canceled.

In addition, some businesses owing tax debt that have foreign legal representatives have paid taxes to the state budget after being notified by the Saigon Port Area 1 Border Gate Customs Branch to restrict their exit. Specifically, S. Vietnam Trading Company Limited, whose director is Korean nationality, has paid over VND42 million; Gi Trading Service Consulting Company Limited. which has a director of Japanese nationality, has paid nearly VND20 million in taxes... Similarly, at the Investment Customs Branch, from the beginning of 2023 until now, it has been issued more than 50 notices for cases of debt arising at the branch; In which, tax debt amounting to over VND8 billion has been recovered and processed.

What enforcement measures are effective?

Clause 1, Article 125 of the Law on Tax Administration No. 38/2019/QH14 stipulates measures to enforce administrative decisions on tax management including (a) Extract money from the taxpayer’s account at the State Treasury, commercial bank or credit institution; freezing accounts; (b) Deduct money from the taxpayer’s salary or income; (c) Suspend customs procedures for exports and imports; (d) Stop using invoices; (dd) Seize the taxpayer’s assets and sell them at auction under law; (e) Confiscate the taxpayer’s money and assets that are being held by a third party; (g) Revoke the certificate of business registration, certificate of enterprise registration, cooperative registration certificate, investigation registration certificate, license for establishment and operation, practice certificates.

However, according to Deputy Director of HCM City Customs Department Nguyen Huu Nghiep, in reality, for the bad tax debts that have accumulated for decades at the customs branches under HCM City Customs Department, Customs authority has applied debt recovery measures following the Law on Tax Administration (except for two difficult-to-apply measures such as seize the corporate assets; coordination with the local Tax Department to temporarily suspend the use of invoices) but all are ineffective. The reason is that most of these businesses that owe taxes are no longer operating and have fled their business registration addresses. There are even many cases where the branch has compiled a tax debt file and transferred it to the police to coordinate in tracking down the business director and demanding tax payment. However, the business stopped operating, and the hiring director is named to the established company hence those measures had no effect. These cases are also not eligible for tax debt cancellation following the instructions in Circular 179/2013/TT-BTC dated December 2, 2013 of the Ministry of Finance, causing the Customs agency to "hold on" bad debts year after year. Furthermore, the implementation of coercive measures to enforce tax administrative decisions must be sequential according to current regulations and has not been highly effective. When implementing the current process, the Customs agency must collect information and coordinate with many competent authorities, so it lead to carrying out many procedures resulting in consuming lots of time...

Deputy Director of HCM City Customs Department Nguyen Huu Nghiep added that HCM City Customs Department has fully applied debt recovery measures, but the effective solution is still to Suspend customs procedures for exports and imports. However, this solution is only effective for businesses that are still operating.

Currently, the total amount of overdue tax debt collected by the end of 2023 at the HCM City Customs Department is over VND1,875 billion, a decrease of over VND534 billion compared to December 31, 2022. Regarding the situation of handling and recovering overdue tax debt, the total amount of overdue tax debt arising before 2023 is recovered and processed in 2023 achieving VND685.32 billion, reaching 85.10% of the assigned target (VND805.31 billion). Regarding the situation of irrevocable debts, the HCM City Customs Department advised the HCM City People's Committee to issue 86 decisions to cancel irrecoverable tax debts with a total accumulated debt of about VND11 billion VND; at the same time, 42 decisions of tax relief were issued with a total debt of VND28.70 billion (accounting for 1.8% of the total bad debts of the whole Department).

Need to add more subjects to apply for exit restriction

Besides enforcement measures mentioned in Clause 1, Article 125 of the Law on Tax Administration No. 38/2019/QH14, HCM City Customs Department also applies measures to restrict exit of the country for legal representatives of businesses owing tax debt (according to Article 66 Law on Tax Administration No. 38/2019/QH14 and Article 21 of Decree 126/2020/ND-CP dated October 19, 2020 of the Government detailing some articles of the Law on Tax Administration). This "tough" measure has recovered tens of billions of dong.

From the actual implementation of tax debt recovery solutions, HCM City Customs Department recommended that General Department of Vietnam Customs (GDVC) regulate in detail the process of verifying taxpayer information to effectively implement enforcement measures; amending regulations to classify tax debts that are being sued into the group of pending debts. At the same time, HCM City Customs Department reported to GDVC to propose amending regulations in the Law on Tax Administration. Accordingly, amending and supplementing Clause 7, Article 124 of the Law on Tax Administration: " The legal representative of the enterprise against which the tax decision is enforced shall fulfill its tax liability before exiting the country and may be suspended from exit under immigration laws”.

According to the HCM City Customs Department, it was discovered that the taxpayer's legal representative was an employee (without the right to make business decisions). HCM City Customs Department proposed to add: Member of the Board of Directors of a joint stock company, member of the Board of Members of a limited liability company, company owner, private business owner, director or general manager should be subject to exit restriction the same as legal representatives and are jointly responsible for the debts of the enterprise. Regarding Article 19 of the Law on Tax Administration, it is proposed to supplement the powers of the tax administration agency: Require the business registration agency not to register or change the business registration content of the enterprise within the time that tax authorities are handling violations of tax laws and customs laws.

In addition, HCM City Customs Department proposes to amend and supplement Clause 5, Article 39 of the Law on Tax Administration in the following direction: Before implementation at the enterprise registration agency, cooperative registration, and business registration, the taxpayer tax must be registered with the direct tax administration agency to fulfill tax payment obligations following the provisions of this Law and other relevant laws. The tax agency directly managing taxpayers is responsible for checking the taxpayer's fulfillment of tax obligations to the state before terminating the validity of the tax code. In reality, many businesses carry out procedures for closing tax codes even though they still owe taxes at the Customs office, it is necessary to stipulate that taxpayers must fulfill their obligations at the tax administration agency (including tax authorities and customs authorities).