Tax laws need revising for E-commerce businesses

Mr. Nguyen Thanh Ha, a well-established lawyer, and Chairman of the SB Law Firm

There is also the need to prevent shortcomings in legalities so that there is no evasion of taxes on revenue earned from E-commerce activities. In a talk with Saigon Investment, Mr. Nguyen Thanh Ha, a well-established lawyer, and Chairman of the SB Law Firm, pointed out many ways to prevent tax losses from E-commerce activities and technology businesses.

- Sir, over the years, Vietnam has strengthened management of tax collection from foreign suppliers, but the collected numbers are still very small. How do you evaluate this situation and how can we limit  tax losses in this segment?

Mr. Nguyen Thanh Ha: - In recent years, the tax collection policies for foreign suppliers in Vietnam has gradually improved and is now more in line with consumer trends and technology businesses in the country. However, the tax collected in this sector does not commensurate with the incoming revenue from cross-border digital platforms, causing a loss of revenue and creating inequality among business models.

For cross-border E-commerce activities, foreign enterprises often refer to tax agreements and claim that since they do not have a fixed business establishment in Vietnam, they do not have to declare and pay corporate income tax. Business activities are mainly done through online applications over the internet and delivery of goods is done via express home delivery. Therefore, tax collection faces difficulties due to lack of a binding agreement which will require all enterprises and individuals to comply with tax payment obligations in Vietnam. Since the payment is mainly done in cash, without an invoice, it is difficult to make a concrete tax structure, and if paying through banks then bank accounts are not registered with tax authorities.

In short, the cause of losses from taxes is due to an incomplete legal corridor for E-commerce activities in the country, making management of taxpayers, source of revenue, control of business transactions and cash flow very difficult. Therefore, in order to limit  tax revenue losses in this segment, it is necessary to quickly improve the legal framework for managing the cross-border activities of foreign suppliers in Vietnam.

Specifically, the General Department of Taxation needs to build a smart tax management system, meeting the ability to connect data with state management agencies, integrate information, handle big data, operate 24/7, and support and create favorable conditions for taxpayers. At the same time, we need to strengthen inspections, monitor E-commerce activities, and focus on foreign suppliers and some owners of E-commerce floors.

- Sir, up to now, there are 258 E-commerce platforms providing seller information to the tax department in Vietnam. However, with such a large network, how simple or complicated is the process of tax collection?

- Compared to transactions done through traditional methods, electronic transactions are definitely much faster and more convenient. By using smart devices and diverse payment channels, buyers and sellers can easily connect and conduct lucrative transactions. This brings revenue to businesses and individuals engaged in online transactions. From the perspective of state management, the management of electronic transactions, including the management and tax collection issues arising from these transactions, is still a relatively new issue.

The law on E-transactions in general and the legal provisions related to the management and collection of taxes arising from E-transactions in particular, have been promulgated quite fully and synchronously but there are still many inadequacies to cover. In fact, competent authorities are still quite confused in the management and guidance of tax declaration and payment for relevant subjects, leading to loopholes for businesses and individuals doing business online who take advantage and cause a loss of revenue for the state budget. There are individuals doing E-commerce business with income up to billions of dongs per month, but still do not declare and pay taxes according to regulations. The tax authorities face many difficulties in controlling and collecting taxes from such individuals.

In general, only a few organizations and enterprises operating in E-commerce businesses are professional, large-scale, under direct management of tax authorities, and declare and pay taxes according to regulations. Most organizations and individuals earning income from E-transactions have not voluntarily declared and paid any taxes. Every year, the State is losing a significant source of budget revenue from tax losses, and these losses will grow much more as E-commerce transactions increase by the day.

In order to overcome these limit ations and inadequacies, the Government must review, revise and update tax regulations for electronic transactions to make declaration and payment of taxes more convenient. At the same time, the Government must strengthen the ability to control and prevent tax evasion by organizations and individuals earning income from E-commerce activities. On the other hand, it is necessary to strengthen coordination between tax authorities, banks, special management agencies, and international organizations in exchanging information on tax administration. This will help in strictly controlling the tax declaration and payment methods of organizations and individuals earning income from electronic transactions in Vietnam.

- Thank you very much.