Customs handles tax debt: flexibly and rigorously- Part 2: Why is the effectiveness of coercive measures not high?

	Applying coercive measures for many businesses owing billions of tax
	Applying coercive measure for one enterprise owing tax of nearly VND100 billion
	Various reasons for tax debt

Ha, Nam Ninh Customs officers review tax debts to take effective measures. Photo: H.Nu

Persistence is uncertainly effective!

According to Hai Phong Customs Department, to reduce the outstanding debt ratio, the unit has always paid attention to taking described measures to urge debt recovery and handling. As a result, from 2019 to the end of 2022, Hai Phong Customs issued 2,351 coercive decisions on a tax debt, collecting VND369 billion. All tax debt records and arising debts have been managed and handled promptly.

Deputy Director of Lang Son Customs Department Nguyen Huu Vuong said that in addition to the prescribed measures, Lang Son Customs has actively worked with competent authorities to implement tax enforcement measures against tax debtors. As a result, in 2022 alone, the unit issued 1,753 tax debt notices, collecting VND 5.66 billion of bad debts arising before January 1, 2022, and collecting VND 3.8 billion of debts incurred in 2022.

According to Mr Nguyen Van Huong, Deputy Director of Quang Ninh Customs Department, since 2019, the unit has worked with Tax Departments and Departments of Planning and Investment of the province to issue 26 enforcement decisions and collected VND3.7 billion of bad debts.

At Binh Duong Customs Department, despite persistence and determination to implement debt enforcement steps, the unit only collected VND2.44 billion of tax arrears of 14 enterprises.

Mr Le Van Danh, Deputy Director of Binh Duong Customs Department, said the account deduction method had brought high efficiency. Thanks to applying this method promptly, the department collected VND1.8 billion of tax debts, accounting for 76% of the total collected amount by applying coercive measures. However, this measure is only effective for newly arising debts. Moreover, the method of collecting money and other assets of tax debtors who are enforced to implement administrative decisions on tax administration, which other agencies, organizations or individuals hold, is not effective because it is difficult to obtain information about organizations, individuals and third parties who are holding money and assets of the tax debtors.

Regarding the effectiveness of the measures, Hai Phong Customs Department said that depending on each tax debtor, the effectiveness of the measures would be different. Specifically, for enterprises engaged in import-export activities, the coercive measures to stop carrying out procedures for import and export goods or deduct money from bank accounts and freeze accounts are effective. On the other hand, measures to stop using invoices and revoke business registration certificates are effective for enterprises that do not have import-export activities but other business activities.

According to Hai Phong Customs Department, some measures have not brought results in debt recovery, such as the measure to withhold part of salary or income; the measure for property distraint, auction of distrained properties and coercive measures by collecting money and properties of taxpayers held by other agencies, organizations or individuals because related units refuse to provide information.

At Lang Son Customs Department, the unit applied only five of seven coercive measures and achieved results. However, Mr Nguyen Huu Vuong said that implementing the measure of property distraint, auction of distrained properties and coercive measures by collecting money and other properties of taxpayers held by other agencies, organizations, and individuals have encountered many problems.

In addition to seven coercive measures specified in Article 125, the Law on Tax Administration 2019 has added a measure to suspend exit for the coerced legal representative of the enterprise who has not yet fulfilled the tax payment obligation. Many customs units have strengthened this measure and obtained certain results.

For example, Lang Son Customs Department sent 672 documents asking for verification about overdue tax debtors to relevant units; sent a notice requesting the police agency to suspend exit for 444 owners of enterprises who owe overdue taxes; issued 111 decisions to stop customs procedures and deduct money from the account of tax debtors who are enforced at the State Treasury, commercial banks, credit institutions; sent 71 documents requesting tax authorities to notify of invalid invoices; sent 24 written requests to the business registration agency to revoke business registration certificate. By implementing the measures, in 2022, the department collected VND 5.66 billion of bad debts incurred before January 1, 2022, and VND 3.8 billion of debts incurred in 2022.

Recently, Hai Phong Customs Department announced the suspension of exit for Ms Nguyen Ngoc Huyen, legal representative of HANEDA GLOBAL Co., Ltd., who is being coerced to execute an administrative decision for failing to fulfil the tax obligation of VND2 billion.

Previously, Ha Nam Ninh Customs Department also sent a document to the Immigration Department (Ministry of Public Security) requesting the suspension of exit for seven directors of companies: TVT Group JSC; Ngoc Anh Trading and Production Co., Ltd; Zenity Vietnam Technology JSC; Hanafood Ha Nam Co., Lt; An Truong Son Construction Services and Trading Co., Ltd; Tam Diep Steel Rolling Co., Ltd for not fulfilling their tax payment obligations.

Although the Customs authorities have applied many measures to urge the company to complete the tax obligations, the company has delayed the payment. As a result, at the end of November 2022, the Processing Customs Branch (Ho Chi Minh City Customs Department) sent the Immigration Department (Ministry of Public Security) to notify the suspension of exit for Mr LU HUNG TIEN (Lu Tien Hung) who is the legal representative, chairman of the Members' Council of Hung Kim Hoang Gold and Silver Company Limited due to import and export tax debt since 2012.

According to some experts, suspending exit is a very effective measure to collect bad debts for enterprises that have dispersed their assets or disappeared from their business locations. This is also in line with international practice. Specifically, the legal representative is the person who decides the important issues of the enterprise and must be present in Vietnam or authorize another person when leaving the country. Furthermore, if the enterprise is forced to implement tax administrative decisions, the exit of a legal representative will affect the interests of the State (the tax collection cannot be done), so the suspension of exit is a must.

Customs officers of Huu Nghi Border Gate Customs Branch (Lang Son Province Customs Department) regularly review the list of tax debtors to urge them to fulfil their obligations to the state budget. Photo: H.Nu

Heaped-up difficulties

Despite efforts, the results are not high. According to Mr Nguyen Van Huong, one of the difficulties in debt recovery and handling is verifying and requesting account balances at commercial banks and other credit institutions. When receiving feedback from banks or credit institutions, the feedback information is mainly that the enterprise does not open an account at a bank or has an account, but the balance is very small, especially in some cases the debtor has already withdrawn money out of the account.

According to Lang Son Customs Department, the reason for the low efficiency in tax debt recovery is that many enterprises have no money and assets to apply coercive measures; the coordination with state agencies in verifying the operation status of enterprises, providing business information, verifying bank accounts is still slow or unresponsive, leading to many difficulties in the debt collection. In addition, many enterprises have unclear addresses and do not operate at registered places, so sending tax notices and applying coercive measures is difficult.

According to an Hai Phong Customs Department representative, implementing coercive measures involves many difficulties and obstacles. The implementation of many measures takes a lot of time and costs. For example, the measure of assets distraint, auction of distrained assets, and the verification of assets of tax debtors face many difficulties because most debtors often have no money or transfer all their assets; the business owner fled, the remaining assets are of low value, the verification time is long.

Ha, Tinh Customs Department said the unit faced many difficulties in collecting information to implement the coercive measure of revoking the business registration certificate for Bac Son Co., Ltd because the unit had to wait for the response from the Department of Planning and Investment; this took much time.

As for the case where the enterprise has abandoned its business address and does not have a legal representative to sign a record as a basis for tax assessment, Ho Chi Minh City Customs Department said that the customs branches could neither make a record to serve as a basis for tax assessment nor send a written notice to the enterprise. Therefore, for this case, Ho Chi Minh City Customs Department proposes to skip the step of making a record and notifying the enterprise as specified at Points a and e, Clause 5, Article 17 of Decree 126/ND-CP.

To ensure the highest efficiency in tax debt collection and handling, local Customs Departments regularly report to the General Department of Customs to send a written request to the local authorities where the enterprise registers business registration for enforcement by revoking the business registration certificate of enterprises having overdue tax debts. Furthermore, other coercive measures, such as stopping procedures, banning exit, deducting accounts, etc. will still be considered for enterprises who deliberately delay the tax payment.

(Part 3: Difficult to collect and write off tax debts)