Need to classify household business

Revenue collected from households business accounts for a very small proportion of the total state revenues. Photo: Thùy Linh

According to the tax management authority, household businesses have been constantly developing, contributing more and more to the innovation and socio-economic development of the country. Up to now, household businesses are still a major entity contributing to job creation and income generation for employees, accounting for a relatively high share of gross domestic product (over 30% of GDP – annual abstracts of statistics of 2017).

In recent years, besides small scale household businesses that only cover family life expenses, there are also many large scale household businesses. According to the tax administration data in 2017, the number of household businesses with a revenue of 1 billion VND or more, is 102,095 households; Many household businesses use regular invoices with revenue up to a few hundred billion VND per year; Many household businesses operate in specific fields that are not suitable with the model of private households, such as chemicals, medical supplies and equipment, construction equipment and construction materials originating from mineral resources.

Despite this, they have made a lot of contributions to the socio-economic development of the country. The tax revenue collection of household businesses accounts for a very small proportion in the total state revenue (according to statistics of 2017, the revenues collected from households business account for only 1.56% of total state revenues excluding crude oil). This is an area that was assessed as a loss of revenue, so it is necessary to have solutions to expand the tax base, thereby increasing state budget revenues.

According to the evaluation of the General Department of Taxation, besides the real situation of household business development, there are shortcomings in the legal framework of household business, support policies and management activities of related state authorities such as: there are no criteria for classifying household businesses in order to serve for the work of tax managements; there are no measures to monitor revenue for households businesses in certain specific industries; There is no comprehensive database for tax administration of business households; There is no solution to encourage people to get invoices from business households.

Therefore, in the revised draft of Tax Administration Law, the General Department of Taxation added some contents to strengthen the management.

Firstly, classifying large scale household businesses to apply the appropriate tax administration forms as follows: Applying simple accounting regime corresponding to small and micro enterprises; Apply e-invoicing, electronic tax declaration, electronic tax payment.

General Department of Taxation said that this will help minimize the exploitation of the household business model for tax evasion purposes, creating a legal framework for taxation to promote large-scale households businesses to be converted into enterprises.

Secondly, classifying household business in the service sector with cash transaction methods in order to apply non-cash measures in retail business transactions, restaurants, entertainment services...

On that basis, it is necessary to take measures to manage the sale of goods which must be issued with an invoice or non-cash payment, in order to promote the use of electronic invoices and link sales information through cash registers or devices accepting card payment.

Thirdly, the classifying of small scale household businesses to apply standard charges increases the transparency, strengthens the role and responsibility of local authorities and related organizations in the area. Hence, to maximize the limitation of using unrealistic standard charges, minimizing the tacit agreement between household businesses and tax officials.

Fourthly, develop measures for the lottery, which aims at encouraging organizations and individuals to participate in supervising business revenue of taxpayers (including enterprises and households business), ensuring taxpayers declare real revenue.

According to the management authority, the classification of household businesses will help to overcome the current inadequacies, enhance the efficiency of tax administration for this group.