It was drafted in the amended Law on Tax Management, which has recently released by the Ministry of Finance (MoF) for recommendation.
According to the ministry, the proposal aims to better manage and collect taxes on e-commerce, which has developed strongly in Vietnam in recent years.
Besides the tax agency, it is necessary to have the close conjunction from other relevant ministries and agencies to make the tax management more effectively, according to the draft law.
Accordingly, the MoF proposed that the tax department will build databases and apply electronic tax services widely, such as electronic tax declaration, electronic invoices and online tax payments, ensuring that 100 percent of taxpayers will have access to these facilities in order to catch up with e-commerce.
Besides, the State Bank of Vietnam (SBV) will take measures to develop e-commerce payment and to ensure cross-border services to pay through payment service suppliers or licensed payment intermediary services.
The MoF will also coordinate with the SBV in guiding commercial banks to deduct the tax that foreign social networking sites such as Google, Facebook and Youtube has to pay when they transfer money from organizations and individuals to the sites.
In developed countries, tax enforcement and control mechanisms are mostly based on declarations of taxpayers but most transactions are made via bank accounts rather than in cash, helping secure full and accurate declaration by taxpayers.
Experts suggested that State management agencies should adopt measures to encourage online payment and reduce cash transactions to help oversee revenues of online traders. There should also be a closer coordination between concerned authorities and intermediary payment banks. Particularly, the e-commerce law should be revised to include liabilities of social network owners, especially foreign ones, to assist and work with tax authorities.
According to experts, tax authorities are finding it tough taxing e-commerce as it is not that easy controlling online business revenues given cash payment so common in Vietnam.
The 2016 Vietnam internet resources report of Vietnam Internet Network Information Center showed that 97 percent of registered websites were used for business or trade promotion purposes. Total e-commerce turnover hit around US$6 billion but taxes collected from business activities on e-commerce websites in general and social networks in particular remained modest.
Although online traders are obliged to pay taxes as per Vietnamese law, collecting taxes from online businesses remains a challenge for tax authorities as it is difficult to oversee the revenues of these businesses.
Under the 2006 Tax Administration Law, every business or individual, regardless of having a business registration certificate or not, that earns over VND100 million from trading activities, including those on social media operating as e-trading floors, must register, declare and pay taxes.
Currently, there are two types of personal income tax for individual traders, namely flat tax and specific tax, which are determined mainly based on taxpayers’ declarations. To declare and pay taxes, individual traders must register their tax codes with tax authorities.
But online traders are reluctant to make tax declaration while the tax authorities’ facilities and personnel for tax inspection and collection are limited, failing to catch up with the swift growth of e-commerce. The common practice of making cash transactions in Vietnam also makes it impossible to determine exact incomes of online shops.
Tax authorities also have difficulties taxing individuals doing business through social networks, such as Facebook, the number of which is growing rapidly in Vietnam. Without cooperation and assistance from social network owners, tax administrators can hardly access information of these traders.
According to the ministry, the proposal aims to better manage and collect taxes on e-commerce, which has developed strongly in Vietnam in recent years.
It is hard to control online business revenues as cash payment is common in Vietnam.
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Accordingly, the MoF proposed that the tax department will build databases and apply electronic tax services widely, such as electronic tax declaration, electronic invoices and online tax payments, ensuring that 100 percent of taxpayers will have access to these facilities in order to catch up with e-commerce.
Besides, the State Bank of Vietnam (SBV) will take measures to develop e-commerce payment and to ensure cross-border services to pay through payment service suppliers or licensed payment intermediary services.
The MoF will also coordinate with the SBV in guiding commercial banks to deduct the tax that foreign social networking sites such as Google, Facebook and Youtube has to pay when they transfer money from organizations and individuals to the sites.
In developed countries, tax enforcement and control mechanisms are mostly based on declarations of taxpayers but most transactions are made via bank accounts rather than in cash, helping secure full and accurate declaration by taxpayers.
Experts suggested that State management agencies should adopt measures to encourage online payment and reduce cash transactions to help oversee revenues of online traders. There should also be a closer coordination between concerned authorities and intermediary payment banks. Particularly, the e-commerce law should be revised to include liabilities of social network owners, especially foreign ones, to assist and work with tax authorities.
According to experts, tax authorities are finding it tough taxing e-commerce as it is not that easy controlling online business revenues given cash payment so common in Vietnam.
The 2016 Vietnam internet resources report of Vietnam Internet Network Information Center showed that 97 percent of registered websites were used for business or trade promotion purposes. Total e-commerce turnover hit around US$6 billion but taxes collected from business activities on e-commerce websites in general and social networks in particular remained modest.
Although online traders are obliged to pay taxes as per Vietnamese law, collecting taxes from online businesses remains a challenge for tax authorities as it is difficult to oversee the revenues of these businesses.
Under the 2006 Tax Administration Law, every business or individual, regardless of having a business registration certificate or not, that earns over VND100 million from trading activities, including those on social media operating as e-trading floors, must register, declare and pay taxes.
Currently, there are two types of personal income tax for individual traders, namely flat tax and specific tax, which are determined mainly based on taxpayers’ declarations. To declare and pay taxes, individual traders must register their tax codes with tax authorities.
But online traders are reluctant to make tax declaration while the tax authorities’ facilities and personnel for tax inspection and collection are limited, failing to catch up with the swift growth of e-commerce. The common practice of making cash transactions in Vietnam also makes it impossible to determine exact incomes of online shops.
Tax authorities also have difficulties taxing individuals doing business through social networks, such as Facebook, the number of which is growing rapidly in Vietnam. Without cooperation and assistance from social network owners, tax administrators can hardly access information of these traders.
