Using technology to prevent tax losses from cross-border e-commerce
On March 16, at the Q&A session of the National Assembly Standing Committee, Minister of Finance Ho Duc Phoc said that the tax agency collected nearly VND5,000 billion from cross-border service providers via organizations in Vietnam (tax paid on behalf of foreign contractors), including Facebook with VND1,694 billion, Google VND1,618 billion, and Microsoft VND576 billion. In 2021, tax revenue from cross-border services reached VND 1,317 billion, an increase of 15.2% compared to 2020.
This figure is modest compared to the actual revenue in Vietnam. According to a report by Google, Temasek, Vietnam's e-commerce market rose 16% and earned a revenue of US$14 billion in 2021. It is forecast that the average growth rate in the period 2020 - 2025 will be 29% and by 2025, the scale of Vietnam's e-commerce will reach $52 billion.
Ms. Nguyen Thi Lan Anh, Director of the Corporate Tax Administration Department (General Department of Taxation), said that a big difficulty for tax authorities is determining tax bases. In the digital environment, business activities can be carried out through websites present in a certain market area, without the need for the physical presence of taxpayers. In addition, in the digital economy, it is difficult to distinguish certain types of income, especially royalties, service fees and business profits, as a tax base.
“Controlling business transactions to manage tax collectors for e-commerce business is also difficult. An e-commerce business owner does not need to go to a store or shop in the traditional way. Transactions are completely done electronically, the server can be located in a foreign country, a person can have many booths on one e-commerce exchange and at the same time on many e-commerce exchanges, on many social networking sites,” said Ms. Lan Anh.
Ho Ngoc Tu, from the Institute of Financial Strategy and Policy (Ministry of Finance), said the possibility of tax losses for e-commerce business is obvious as it is difficult for management agencies to monitor and collect information about online business. Businesses in the field of e-commerce may be easier to evade taxes than traditional business forms because digital technology can keep information confidential.
In fact, some organizations and individuals use websites to promote products and goods, sell directly to consumers, and do not issue invoices or declare value-added taxable revenue, personal income tax and corporate income tax.
“For intangible goods and services such as software, pictures, music, consulting services or other goods and services using digital technology, tax collection is difficult when customers can buy and receive products and pay online without the need for distributors, means of transport, or intermediaries to distribute goods to buyers," said Mr. Tu.
Technology is the core
Dr. Vu Xuan Dung from the University of Commerce said that checking websites, searching and analyzing unusual e-commerce transactions of organizations and individuals in order to detect fraud and tax violations is currently being implemented in a simple way, based on the actions of tax officials. The tax agency needs to invest in specialized software tools for tracing, detecting and handling e-commerce transactions committing fraud and tax violations.
Dr. Le Xuan Truong, Dean of Tax and Customs Department of the Academy of Finance suggested that, in addition to completing the legal corridor, it is necessary to promote technology application. Specifically, it is possible to set up a high-tech tax evasion prevention center under the General Department of Taxation, or assign this function to the Information Technology Department of the General Department of Taxation to act as the focal point to deploy the software system.
According to Truong, information technology must be the core associated with other modern technologies to control taxpayers' business transactions.
“In the long run, along with the amendment of legal regulations on tax declaration and payment, it is necessary to develop an automatic tax calculation system associated with the space and real time of transactions in the digital economy," said Truong.
Meanwhile, Mr. Ho Ngoc Tu suggested that the tax administration agency should coordinate with a third party, a big technology and network service provider (Viettel, VNPT, MobiFone...) to build data on e-commerce activities on the market, collect taxes, and notify people of tax obligations. Tax authorities also need to coordinate with third parties to develop separate tax calculation software designs for e-commerce and further promote the application of e-invoices.