Digital transformation to combat tax loss from e-commerce

Vietnam's e-commerce revenue in 2021 was estimated at US$13.7 billion, an increase of 16% compared to 2020. Photo: S.T

Inter-agency coordination for tax management

E-commerce in Vietnam has made significant progress and brought great benefits. According to a report from the Ministry of Industry and Trade, Vietnam's e-commerce revenue in 2021 was estimated at US$13.7 billion, an increase of 16% compared to 2020 and accounting for 6.5% of the total retail revenue of the country.

According to the General Department of Taxation, following the development trend, e-commerce will have a shift in revenue from transactions between businesses and consumers (B2C) to transactions between individuals. In fact, many businesses are using e-commerce transaction methods to reduce intermediaries, reduce costs and speed up the circulation of goods. At the same time, more and more individuals are using social networks and e-commerce sites to provide goods and services to consumers.

According to Mr. Dang Ngoc Minh, Deputy Director General of Taxation, with the characteristics of the digital economy and e-commerce, not only the tax industry in Vietnam but also in the whole world are facing many difficulties. First, the difficulty in fully managing revenue sources and taxpayers, regardless of whether the taxpayer may be an organization or an individual. Secondly is tax calculation. Along with that, it is difficult to distinguish the types of income.

E-commerce has many types of fees such as service fees, royalties, etc. There are many types of costs that need to be clarified to distinguish and calculate as a tax basis. The third is managing objects subject to tax because it can be an organization or an individual, an individual can open many shops on social networking sites or they can also sell goods on many different e-commerce platforms. The fourth is cash flow management because cash transactions are still common in Vietnam compared to transactions via banks.

A representative of the General Department of Taxation said the General Department of Taxation has actively coordinated with relevant units such as the Ministry of Industry and Trade, the Ministry of Information and Communications, the Ministry of Public Security,... to improve the efficiency of tax administration for e-commerce.

The Ministry of Finance has approved the Scheme "Tax management of e-commerce activities". Accordingly, the General Department of Taxation has continued to carry out activities such as strengthening dissemination and supporting taxpayers, especially guiding large foreign suppliers to register, declare and pay tax on the Tax Department's electronic portal; actively participate in the negotiation to develop the content of the multilateral agreement on the allocation of taxing rights for incomes from the digital economy; perfecting tax legislation to strengthen the responsibility of e-commerce exchange owners in tax declaration and tax payment on behalf of sellers of goods and services through the e-commerce exchange, as well as providing information to tax authorities via electronic means.

The Tax sector also actively cooperates in building a database to manage risks for e-commerce; applies artificial intelligence (AI) to process data, gives warnings in case the risk threshold is exceeded and proposes risk-based tax management measures for e-commerce activities.

The State Bank has coordinated with the Ministry of Finance in directing and guiding commercial banks to connect and provide information on account numbers of domestic organizations and individuals. Also, the General Department of Taxation has completed upgrading the application for receiving account numbers of organizations and individuals from 91 commercial banks and foreign bank branches.

Pioneering digital transformation

According to the General Department of Taxation, through implementing synchronous solutions for tax administration, the tax sector has achieved some remarkable results.

Taxpayers are individuals doing business in the field of e-commerce who have consciously declared and paid taxes complying with the provisions of the law. Some e-commerce exchanges have had good coordination in providing information for tax management. The tax authority has strengthened tax administration and put into tax management for many individuals and organizations operating businesses in the field of e-commerce to disseminate and support taxpayers to comply with the law.

Prof. Dr. Hoang Van Cuong, Member of the Finance and Budget Committee of the National Assembly, Vice President of the National Economics University, said that the tax administration of e-commerce of Vietnam has achieved remarkable results.

“The tax industry is the pioneer industry and the first industry that is most appreciated for digital transformation of Vietnam. Thanks to the digital transformation platform in tax administration, when transaction activities are no longer physical, tax management tools must also change to adapt. This process is done quite quickly by the Tax Department. And thanks to that, Vietnam is considered as one of the four leading countries in Southeast Asia in cross-border tax management through the fact that network operators have to declare tax on the Portal," Prof. Dr. Hoang Van Cuong said.

The General Department of Taxation will also continue to modernize tax administration; upgrade information technology infrastructure to connect and store information to support and connect with taxpayers (foreign suppliers, e-commerce exchanges) in an electronic form directly at the Portal of the General Department of Taxation; build a smart tax management system, meet the ability to connect data with state management agencies, integrate information, process big data, operate 24/7, support and facilitate favorable to taxpayers.

At the same time, implementing inspection and examination according to regular and thematic plans for e-commerce activities, focusing on foreign suppliers who do not have a fixed business establishment in Vietnam and some owners of e-commerce exchanges.

In addition, the General Department of Taxation will actively participate in negotiations to develop the content of the multilateral agreement on the allocation of taxing rights to income from the digital economy; perfecting the tax legislation to strengthen the responsibility of the owner of the e-commerce exchange in declaring and paying tax on behalf of the seller of goods and services through the e-commerce exchange with the function of online ordering and providing information to tax authorities by electronic means.