Preventing tax loss from e-commerce business

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Business activities on e-commerce platforms have been thriving for many years.

Many individuals have "huge" income

Recently, at the Hanoi Tax Department, three individuals paid taxes of more than VND7 billion per person for e-commerce business activities that surprised many people by the profits that this brings, including an individual with a turnover of more than VND330 billion who had to pay tax with the amount up to VND23 billion. In fact, along with the rapid development of the digital economy, business activities on e-commerce platforms have grown strongly for many years. More and more individuals with intelligence and creative abilities have earned income from YouTube, Google, Facebook and app markets like Playstore and Appstore.

In fact, this is only the "tip of the iceberg", it is the result of many measures to strengthen tax administration of the entire tax sector. In HCM City, to manage and collect taxes for organisations and individuals doing e-commerce business on websites and social media, it had to review 14,951 websites. Since then, 1,092 website owners have been identified as taxable. However, only 56 individuals voluntarily declared with additional tax and late payment interest of VND1.83 billion. For the rest, the tax sector examined the 580 enterprises and individuals with total tax arrears, fines and late payment interest of VND18.5 billion. In addition, the HCM City Tax Department has also reviewed 4,573 organisations and individuals in Vietnam providing cross-border services with income generation in Vietnam. Through propaganda and advocacy, there were 3,630 enterprises and individuals voluntarily declared tax and late payment to the tune of VND35.2 billion. Through inspection, tax authorities retrospectively collected and fined 103 cases with the total amount of VND13 billion.

In the Hanoi Tax Department, as of December 2020, the sector’s data system has managed the revenues of individuals operating from Google, Facebook andYouTube with total revenue of individuals received VND2,200 billion. Based on data collected from transport intermediaries, providing accommodation applications, the unit is building a database of 2,307 rental addresses and 31,244 stores with e-commerce business activities to perform tax administration.

Nguyen Van Manh (Cau Giay District, Hanoi) is an individual who declared tax at the Hanoi Tax Department, and was invited by this unit to participate in a seminar on tax policy training for individuals engaged in e-commerce activities in 2020, said that he agreed with the implementation of declaration, payment and retrospective collection on e-commerce platforms.

"We know all the individuals invited by the tax agency to train on tax declaration and payments for e-commerce activities have the revenue level that the tax agency gets information from the cash flow through the bank. Therefore, tax evasion is not possible. I will follow the instructions from the tax authority to fully declare and pay taxes in accordance with the law," said Manh.

Nguyen Thi LanAnh, Director of Department of Tax Administration of Small and Medium Enterprises, Business Households and Individuals (General Department of Taxation):

According to law, when the tax agency discovers taxpayer makes a false declaration,they will be fined for tax administrative violations as well as charged late payment interest. In case taxpayers intentionally evade taxes, in accordance with current laws, they can be fined 1-3 times. In more severe cases, the tax agency will turn to an investigative agency for criminal handling according to the provisions of law. Therefore, to avoid penalties, taxpayers need to learn about tax policies and voluntarily fulfill their obligations to declare and pay taxes.

Tax authorities will always support taxpayers to fulfill their obligations in accordance with the provisions of law. When there are problems arising in registration, declaration and payment of taxes, organisations and individuals can contact the tax agency for timely guidance and support.

Raise importance of propaganda and guidance

The General Department of Taxation has issued many documents directing local tax departments to strengthen solutions to manage personal income tax collection in the field of e-commerce. On that basis, tax departments have also seriously implemented tax administration measures for this business, especially promoting propaganda and support for taxpayers to declare and pay tax.

Big cities such as Hanoi, HCM City, and Da Nang have promoted the propaganda and dissemination of tax policies, tax declaration and payment to all taxpayers with e-commerce activities. At the same time, they review and urge taxpayers with e-commerce activities to declare and pay taxes in accordance with local taxpayer decentralisation. According to the Hanoi Tax Department, from 2017 until now, this unit has sent messages to subscribers who have a sales address on social networks with 13,000 messages and has determined more than 2,000 individuals will carry out tax declaration registration procedures. The Hanoi Tax Department has also sent invitations to more than 1,100 individuals to tax departments for guidance on tax policy and tax declaration and payment. At the same time, organising many seminars to train tax policy for individuals carrying out e-commerce activities in the area.

The tax sector has also paid great attention to the inspection and examination according to regulations for businesses with e-commerce. Notably, in the implementation of the directions of the leaders of the Ministry of Finance, the General Department of Taxation, local tax authorities have coordinated with commercial banks to control the cash flow from abroad to the organisations and individuals.

In the complex developments of Covid-19, traditional trading activities are "inferior" compared to electronic business and tax collection from e-commerce business activities will become one of the "spearheads" for the whole sector to fulfill its budget collection tasks and offset the revenue deficit caused by pandemic. Therefore, the entire tax sector must have more drastic measures, creating a solid legal "barrier" to prevent tax evasion, tax fraud, and loss of revenue to the state budget.

According to the General Department of Taxation, for the business model of online advertising services of foreign organisations that do not have legal entities in Vietnam such as Google, YouTube and Facebook, tax authorities administer taxes on income derived from these activities through their advertising partners or agencies or businesses that purchase services from these companies in Vietnam. Thus, Vietnamese enterprises that sign advertising contracts with foreign organisations will declare and pay taxes on behalf of foreign contractors and organisations. For the tax amount already declared and paid on behalf of, enterprises are included in deductible expenses when declaring corporate income tax.