Saigon Investment spoke with Asso. Prof. Dr. Dinh Trong Thinh, senior lecturer at the Finance Academy under the Ministry of Finance, to share his opinion on this issue.
JOURNALIST: - Sir, of late ecommerce and online trading businesses have been flourishing, and individuals and businesses have reported good growth in this field. Is this the flow of currency that tax authorities have been unable to control?
Asso. Prof. Dr. DINH TRONG THINH: - First of all, we must acknowledge that ecommerce is the inevitable future trend towards digital economy and the 4.0 tech era. This trend we cannot deny and must learn to live with. The current Covid-19 pandemic has shown us the many advantages of ecommerce. When people are being forced to follow social distancing, and so many production and business activities have temporarily been suspended, many businesses and even small households and individuals are having to innovate. For this reason, it is understandable that in order to generate income, many online businesses are now thriving, but still fault with taxes.
Most of these businesses, households and individuals doing such online businesses collect payment for goods in cash and use websites, or social media sites, to only advertise their products, but the actual sales are via phone or text, which makes it extremely difficult for tax authorities to assess their revenue. People also have a habit of buying goods without wanting a receipt, and therefore undisclosed cash for goods from consumers also unknowingly helps in evading tax. This is a problem that has been talked about a lot but so far remains uncontrollable.
In the current tense pandemic scenario, manufacturing industries are operating in moderation, while many businesses have even shut down. The National Assembly brought out a Resolution to reduce 30% on enterprise income tax in 2020 for small and micro enterprises, which also affects the State budget revenue. Groups of small and micro enterprises account for a majority of operating enterprises, hence a tax reduction will significantly also reduce the state budget revenue. The reduction of upto 30% of corporate income tax means that the budget revenue will greatly reduce.
This is double pressure on the fiscal policy for this year, or even for many years to come. The balance of revenue and expenditure this year will be very difficult and surely create a budget deficit. Every year the budget is in deficit, but this year the deficit rate may increase by 1.2% to 1.5% compared to other years. This also means that the National Assembly budget deficit target will be very difficult to achieve. It is therefore necessary to expand and strictly control budget revenue. I think that controlling the revenue of online businesses will definitely benefit the state budget revenue.
Some survey results show that out of 35% of businesses selling goods on social media sites, there are probably millions of individuals and business households selling and exchanging goods on facebook, in which case a very large chunk of revenue is going tax free. So, this is a huge gap in our budget revenue today.
- Sir, the collection of corporate income tax and individuals selling goods online is in accordance with international practices. However, the implementation of regulations for control are facing many obstacles. In your opinion, where is the problem and what is the solution for this?
- I think the biggest difficulty right now is lack of close coordination between authorities, ministries and agencies. Specifically, there is a lack of coordination between the tax office in the Ministry of Finance and banks where the cash flow can be controlled, and various operators and agencies that control personal account information on social networks. Due to inadequate management by the business registration authority, as well as lack of coordination between operators, tax authorities and commercial banks, the sanctions are not strict which then leads to loss of tax revenue from online businesses.
Without the coordination of network content providers, internet information management units cannot provide user data to tax authorities. However, whether cross-border digital content providers are willing to cooperate with the tax authorities or not is difficult to confirm. For example, in order to obtain information on internet business transactions based primarily on direct comments and messages between sellers and buyers, the tax authorities must coordinate with the Ministry of Information and Communication and network providers. However, the authorities can only collect flat taxes on each facebook account, making it difficult to determine specific income.
In order to ensure that the tax administration for ecommerce businesses in general and online selling in particular, in my opinion, should have close cooperation with the Ministry of Finance and the State Bank, to create a payment method. This will help in building a national ecommerce payment system, and integrate electronic payment for widespread use. At the same time, it is necessary to set up a payment transaction and supervision State management for ecommerce services, trading via social networks and providing online services.
It is hence necessary to strengthen coordination between the Ministry of Industry and Trade, the Ministry of Information and Communication, and the Ministry of Public Security to manage ecommerce activities in accordance with the law. This would include sharing of information on enterprises and individuals operating in the field of ecommerce. On the other hand, organizations such as Google and Facebook could set up branch offices in Vietnam, as contact points, and strictly manage the provision of services, especially the declaration and payment of tax on these services.
- Thank you very much.