How to prevent tax losses from cross-border advertising
According to the General Department of Taxation, there are 15 large corporations and technology companies in the world earning a lot of money from Vietnam through cross-border businesses.
If Vietnam's online advertising revenue is about 1 billion USD, Google and Facebook account for more than 80%, or more than 800 million USD, according to Vietnam Digital Marketing Trends 2021 report.
Although they earn billions of US dollars in revenue from the Vietnamese market each year, the amount of tax Vietnam collects from these 15 corporations is modest, just over 1,000 billion VND (over $43.4 million) a year. In particular, this amount of money is not paid by these groups, but their contractors and agents.
“Statistics show that from 2018 to the end of October 2021, these groups declared and paid taxes a total amount of more than 4,263 billion VND, including more than 1,641 billion VND from Facebook; over 1,573 billion VND from Google; over 560 billion VND from Microsoft … In 2020, tax revenue from cross-border e-commerce activities reached over 1,143 billion VND,” said Ms. Nguyen Thi Lan Anh, from the Tax Administration Department of Small and medium-sized Enterprises, Business Households and Individuals of the General Department of Taxation.
In 2021, taxes collected from Vietnamese organizations that signed online advertising contracts with foreign organizations that do not have legal entities in Vietnam such as Google, Youtube, Facebook... was 1,314 billion VND, including 521 billion VND from Facebook, 490 billion VND from Google, and 164 billion VND from Microsoft.
Dr. Dinh Trong Thinh said the tax revenue is not commensurate with the revenue and potential of e-commerce. With a cross-border operating model, without a legal entity in Vietnam, it is very difficult to manage, monitor and collect information and data, making tax declaration, tax calculation and payment inaccurate. This is actually an act of tax evasion…
Mr. Nguyen Thanh Lam, Director of the Press Department (Ministry of Information and Communications), said that currently data on the behavior of information readers and shoppers are in the hands of cross-border technology platforms, so most of the advertising costs go to foreign technology companies.
Lam said that it is necessary to master technology so that user data is not controlled by foreign businesses, thereby regulating advertising resources on good and healthy content to serve users. In 2022, the Ministry of Information and Communications will continue to coordinate with relevant ministries and sectors to uniformly deploy economic and technical solutions to require cross-border social networks to comply with Vietnamese law on handling information violations, and paying taxes in Vietnam.
According to the General Department of Taxation (Ministry of Finance), in 2022, one of the key tasks of the tax sector is to uniformly implement solutions in tax management for e-commerce and digital platform-based businesses of foreign suppliers who do not have a business establishment in Vietnam.
“The Ministry of Finance has signed a cooperation agreement with the Ministry of Industry and Trade, including content about coordination in formulating and perfecting the law in the field of e-commerce. The two ministries will share databases and connect to exploit information to serve the state management of domestic e-commerce business," said Ms. Lan Anh.
The General Department of Taxation also proposed that the Ministry of Finance develop cooperation programs and coordinate with the Ministry of Public Security and the State Bank of Vietnam on a mechanism to connect and share databases for tax administration.
Key tasks of the General Department of Taxation in 2021 include tax management and tax collection from online business activities, and from individuals and businesses with revenue generated from Facebook, Google and YouTube.