Tax Loopholes In E-commerce Need To Be Eliminated

E-commerce has gained stunning growth over the last few years

The difficulty is attributed to loopholes in the legal framework.

According to Manh Thi Tuyet Mai from the General Department of Taxation (GDT), the business code system does not include regulations for e-commerce, so it is difficult for taxation agencies to identify the tax obligations of individuals and enterprises doing business online. 

Meanwhile, paper invoices still prevail in Vietnam. Very few enterprises register to use e-invoices, while the e-invoicing systems of enterprises do not connect with taxation agencies. It is difficult to get exact information about the income of online business activities.

Identifying the nature of transactions to set the appropriate tax rate is also a big problem for tax officers. 

Only businesses such as Uber and Grab are big enough to receive specific guidance from GDT on tax declarations and payments.

Like some other countries, Vietnam’s taxation agency faces problems in collecting foreign contractor tax (FCT). Many foreign institutions are not physically present in Vietnam, but have earnings in the country. 

Meanwhile, individuals and institutions selling goods via social networks such as Facebook and Zalo do not issue invoices. They ask delivery personnel to collect cash from buyers via COD (cash on delivery), or ask customers to make payments via specific channels. 

Nguyen Thanh Hung, chair of the Vietnam E-commerce Association (Vecom), noted that  cryptocurrency and blockchain have become more common and will affect online business activities. However, no legal framework mentioning these issues has been created.

Therefore, GDT has to ‘encourage’ enterprises and individuals doing business online to declare their revenue and pay tax.

In 2017, the HCMC Taxation Agency sent letters to 14,500 individuals and institutions doing business online and asked them to declare tax. Of these, the agency identified the exact revenue of 4,000.

Mai said GDT is determined to add online businesspeople to the list of subjects for tax management. 

The agency is planning to cooperate with network operators and transport firms in the immediate time to implement the task.

GDT is also working on an e-invoice project to encourage the use of e-invoices, and is planning to submit a report on the issue to the government in 2018. 

An e-portal website will be opened for online businesspeople to declare tax, register their business and pay tax, and use e-invoices included on the website.

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