A shop in Khanh Hoa accepts payments via WeChat Pay

According to Tran Viet Trung, director of the Khanh Hoa Tourism Department, the province received 6.3 million travelers, including 2.8 million foreign travelers, an increase of 37 percent over 2017. 

Most foreign travelers were form China, accounting for 67 percent, an increase of 153 percent compared with 2017.

In order to lure more travelers,travel firms serve clients on low-cost tours organized by foreign partners. To offset the low tour fees, they take tourists to shops where they have to buy goods at high prices and low quality. 

Because of the sophisticated payment methods used, local authorities cannot control the cash flow and revenue of the shops.

Tran Sy Quan, deputy director of the Khanh Hoa provincial Taxation Agency, explained that with low-cost tours, travel firms do not expect to make money from tour fees, but from the sale of goods. A product priced at VND20,000 can be sold at VND3 million.

Most shops are registered as business households. They don’t have to declare input prices and do not pay corporate income tax based on their profit. 

The presumptive tax rate which they pay can be adjusted only once a year. 

Khanh Hoa’s deputy chair Tran Son Hai said it was difficult to set up floor prices in the current cutthroat competition.

Vietnam’s Price Management Law stipulates that goods and service providers must ‘quote the selling price’ and ‘sell at the quoted prices’. 

However, the law is no longer suited to the current situation because market prices can go up and down at any time. “The selling prices will be different in different weather conditions. The prices will also be adjusted depending on the amounts of goods clients buy,” Hai explained. “Meanwhile, e-commerce transactions are booming and clients can book hotel rooms and services via internet.”.

“As we have failed to control the cash flow, we cannot calculate the tax that businesses have to pay,” Hai said.

A report from the labor department also found that 323 foreigners have permits to provide tourism services in Khanh Hoa. Most of them are from Russia and Eastern Europe, while there are only nine Chinese. 

Meanwhile, the provincial police said in 2018, the agency discovered 513 foreign workers with no work permits.

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