Untangling the tax refund bottleneck

Tax refund challenges: Intangible capital flows and costs

Last week, the tax sector received significant encouragement when Prime Minister Pham Minh Chinh commended the efforts in tax administration reform. The Prime Minister emphasized that the tax sector has undergone a strong reform journey, particularly in the application of information technology and digital transformation such as electronic invoices and online tax declarations, contributing to improving the business environment. This commendation serves as motivation and expectation for the tax sector to continue removing administrative barriers and creating maximum convenience for businesses and taxpayers.

The tax sector has undergone a significant reform journey, particularly in the application of information technology and digital transformation.

Despite the recognized technological successes, the bottleneck in value-added tax (VAT) refunds remains a persistent issue, constantly raised and petitioned for by the business community. According to regulations, VAT refunds must be processed quickly and promptly, before January 1, 2026, as directed by the Ministry of Finance , to support cash flow for export or investment businesses. However, many businesses report prolonged delays in processing their applications, with some cases lasting up to 12-18 months.

Many economic experts analyze that delaying tax refunds is no different from the state borrowing interest-free capital from businesses. This tied-up capital increases opportunity costs and erodes competitiveness, especially for small and medium-sized enterprises with limited financial capacity.

Speaking to reporters, a representative of a textile and garment manufacturing and export company in Bac Ninh said that for the export-oriented manufacturing industry, which has a large capital cycle and rapid turnover, liquidity is a crucial factor for survival. "In the current volatile international market, every dollar of matching funds is extremely valuable for us to maintain production, import raw materials, and pay wages to workers on time," the representative said.

The delay in VAT refunds is not simply a matter of financial costs, for example, businesses having to borrow from banks to cover the costs and incur interest... but more importantly, it creates a setback in terms of psychology and trust. When businesses have fulfilled their obligations, the funds have to wait too long. If this delay continues, it can affect the business community's confidence in the timeliness of government support and reform policies. In reality, the delayed VAT refund funds are turning support into a burden of waiting instead of a resource to fuel recovery and competitiveness in the global market.

Policy breakthroughs and key technologies to unlock tax refund bottlenecks.

The recent approval by the National Assembly of the amended Value Added Tax (VAT) Law (expected to take effect from January 1, 2026) is seen as a timely response to long-standing requests from the business community, demonstrating a clear separation between tax refunds and combating tax fraud in the management system. This amendment creates two major bottlenecks, expected to unblock the flow of capital that has been stalled. The new law boldly removes the strict requirement of "payment made" through a bank for exported goods and services in tax refund cases. This change directly simplifies procedures, reduces the burden of proving complex payments, and significantly shortens the time businesses need to prepare tax refund applications.

Simultaneously, the Law also expands and clarifies the cases eligible for tax refunds, particularly increasing transparency and legal certainty for export businesses and investment projects. These changes are a significant step forward, transforming tax refunds from an "administrative barrier" into an effective liquidity support policy and building practical confidence for export businesses.

Faster tax refunds will support cash flow for export or investment businesses.

However, resolving the tax refund bottleneck cannot rely solely on goodwill or new institutions; it requires groundbreaking technological solutions. According to economic experts, the root cause of this "bottleneck" is a double risk: excessive caution following fraud cases and a complex, inconsistent assessment process. With the new legal framework passed by the National Assembly, the urgent requirement is to ensure that the pace of reform is reflected in the practical flow of capital back into businesses.

The achievements of tax administration reform are undeniable, but the "bottleneck" of VAT refunds remains the biggest obstacle to the flow of capital and liquidity for businesses. With the new legal framework, the tax sector needs to focus all its efforts on innovating risk management thinking, trusting in technology to streamline procedures, and prioritizing the speed of capital recovery to transform tax refunds into working capital, instead of a burden of bank interest.

Given the current reality of tax refund delays, the Vietnam Chamber of Commerce and Industry (VCCI) and the Vietnam Association of Accountants have proposed a fundamental solution: the widespread and reliable application of a risk management classification system in tax refunds. Instead of manually checking all files, tax authorities should implement a clear classification system: applying the principle of "refund first, check later" for low-risk files to expedite disbursement (6-10 working days), and conversely, increasing pre-checking for high-risk files.

Notably, one of the digital reform achievements praised by the government is the widespread deployment of electronic invoices (e-invoices). E-invoices are not only an effective tool to combat tax fraud at its source and prevent the use of fictitious invoices, but also a key to unlocking capital for businesses in the tax refund process. Tax authorities need to make the most of the enormous data repository from e-invoices to support the auditing process. Specifically, the system must be upgraded to automatically verify the origin and provenance of goods and accurately identify suspicious transactions in real time.

Notably, digital reform achievements such as the widespread deployment of electronic invoices (e-invoices) are key to unlocking capital. E-invoices not only combat tax fraud at its source but also provide a massive data repository for auditing purposes. Tax authorities need to maximize the use of this data to automate the verification of the origin and provenance of goods, and identify suspicious transactions in real time.

If e-invoice data is recognized and used by the system as strong legal evidence for the legitimacy of transactions, the time required for document verification will be significantly shortened. This is the optimal way to harmonize the speed of tax administration reform and the effectiveness of policy implementation into tangible trust and cash flow for the business community.

Comment (0)