Need a strong measure for real estate enterprises who are procrastinating on tax

Publicity of real estate tax debt is necessary. Photo: Nguyen Hien.

Deliberately delay

Currently, tax debtors focus on two main areas: production and business tax debts and land use levies. In particular, the amount of land use levies of enterprises is quite large.

According to the data of the Hanoi Tax Department, this unit has many businesses which have owed land use fees for many years with amounts of up to hundreds, tens of billion VND. (hundreds of tens of billion?) Typically, such as: Song Da - Thang Long Joint Stock Company with a debt of nearly 355 billion VND; Vietnam Mechanical and Construction Joint Stock Company with a debt of over 61.8 billion VND; Song Da No 9.06 Joint Stock Company with a debt of nearly 40 billion VND; Electricity Water Machine Assembly Joint Stock Company No. 1 with a debt of more than 36.6 billion VND; Electricity Water Machine Assembly Joint Stock Company No. 2 with a debt of 34.3 billion VND; Jikon Construction Foundation Joint Stock Company with a debt of 34.2 billion VND; Urban Infrastructure Investment and Trading One Member Limited Liability Company with a debt of nearly 30 billion VND.

About Song Da - Thang Long Joint Stock Company with a large debt, since 2015, the Hanoi Tax Department has repeatedly sent notices, invited to meet, then applied drastic measures such as force-account, invoice enforcement, even revocation of business license. However, with weak financial strength together with the problem of CT2-105 UsilkCity project (invested in by the company that has been delayed and has not been handed over to customers since 2010), Song Da - Thang Long Joint Stock Company is still a "hot issue" that the Hanoi Tax Department cannot collect tax debts from, of which the debt is hundreds of billion VND.

Regarding other cases of land use levy in the area, Hanoi Tax Department has implemented all coercive measures in accordance with regulations. However, so far, this unit is still calling for businesses to pay taxes.

Over time, the whole Tax sector has continuously established inter-sectoral missions to implement the task of combating tax losses. The tax authorities have also applied coercive measures to debtors such as: force-account, invoice enforcement; enforcement of property by distraint (for business households); revocation of business license, and sent messages to enterprises to urge tax debts, or posted tax-liable enterprises on the mass media. However, many businesses still deliberately delay from year to year.

Fine is not enough deterrence

In practice, in the management of debt, the tax sector has applied a series of coercive measures to handle businesses that still delay paying taxes. However, the effectiveness of these measures has not really been successful.

According to the provisions of the Law on Tax Administration, tax coercive measures must be implemented in the right order, from the smallest measure of deduction from the deposit account of taxpayers to the two heaviest measures of revoking the tax code, suspending the use of invoices and revoking the business certificate. These provisions are making it difficult for local tax authorities, as it would take a long time for coercive measures to take place in the right order.

On the other hand, the main cause of the tax debt is due to enterprises suffering from difficulties in production and business so they do not have the financial capacity to fulfill their tax obligations. Moreover, there are cases of enterprises occupying capital of each other, delaying payment that leads to tax debt. Other cases, enterprises being subcontractors and enterprises supplying raw materials to main contractors for execution of works funded by the State budget are not timely paid by the State budget, leading to tax arrears.

According to a real estate expert, real estate businesses are always in shortage of capital, so tax debt is understandable. "Particularly, interest rates on bank loans require a collateral of over 11% per year. If you owe tax, you will not have to mortgage, the enterprise can use the tax debt to do business. Under the regulation, the penalty for late tax payment is 0.03% per day, equivalent to about 11% per year, lower than the interest rate for investments. The reduction of penalties is not enough to deter enterprises that have not complied with the fulfillment of the state budget obligations. That is one of the reasons for the increase in the number of real estate companies owing taxes," he said.

As many think, in order to limit the status of real estate businesses’ tax arrears, tax authorities should publicly name the businesses, so that the market is transparent. Then people can appreciate the financial capacity of the investor before deciding to buy land and houses of a project. At the same time, enterprises that have owed taxes should not be assigned to carry out a project. For projects that are suspended and have tax debt, it is necessary to recover to avoid the situation of outstanding debts.

Accelerating to collect project fees, enterprises are essential to ensure equity under the law as well as increase revenue to the state budget. In addition to enhancing collection solutions, strong measures should be taken for businesses to pay tax. In particular, raising the level of sanctions or forms of accompanying is an important basis to focus on solving the current debt situation.