Increase tax revenue from Google, Facebook, TikTok, etc.

Việt Nam•10/08/2023

Tax revenue is not commensurate with potential.

In the first six months of 2023, cross-border technology service providers such as Google, Apple, Facebook, Netflix, TikTok, Microsoft, etc., paid nearly 4 trillion VND in taxes. Prior to that, in 2022, this sector of cross-border technology businesses paid nearly 3.5 trillion VND in taxes.

However, the tax figures mentioned above are inaccurate and insufficient to reflect the actual business practices of these "giants." In the e-commerce sector alone, six major foreign providers—Meta (Facebook), Google, Microsoft, TikTok, Netflix, and Apple—account for 90% of the market share for cross-border e-commerce services and digital platform businesses in Vietnam. In 2022, the Vietnamese retail e-commerce market was estimated to reach US$16.4 billion.

In the digital advertising sector, according to Kantar Media Vietnam, revenue on platforms such as Facebook, YouTube, and TikTok was approximately $2.5 billion in 2022. In 2023, this figure is projected to reach $3.4 billion, equivalent to 80 trillion VND.

Vietnam has only collected a small amount of contractor tax declared and paid by Vietnamese businesses. For cross-border businesses, relevant taxes have yet to be collected because they have not agreed to establish offices or legal entities in Vietnam. According to current regulations, the tax rate for e-commerce business for individuals and household businesses ranges from 1.5% to 10%. Therefore, the State is losing tens of thousands of billions of dong in revenue.

Along with tax revenue losses, tax authorities have noted instances of tax evasion and avoidance by cross-border service providers.

Mr. Nguyen Bang Thang, Director of the Department of Large Enterprise Tax (General Department of Taxation), stated that the tax authorities will continue to create the most favorable conditions for foreign suppliers and domestic organizations to operate seriously and develop their businesses in Vietnam. However, the tax authorities will also apply strict sanctions and handle violations in accordance with the law against organizations that intentionally commit tax violations.

A prime example of tax law violations is TikTok Shop. According to tax authorities, for over a year, many businesses and individuals have been operating without tax registration, avoiding the 10.8% tax by purchasing advertising through rented accounts from agencies with official contracts with TikTok in Vietnam. These agencies openly offer tax-free account rental services and use various methods to minimize issuing invoices to customers, thus avoiding tax declarations and posing a risk of revenue loss for the state budget.

Solutions to combat tax evasion.

Mr. Nguyen Bang Thang affirmed that the tax authorities regularly coordinate with relevant agencies to review and compare data, and analyze risks regarding the declaration obligations of foreign suppliers and authorized organizations in order to apply inspection and audit measures and strictly handle any violations. "The experience of other countries, including the United States and Europe, shows that there must be close and synchronized coordination between state management agencies and tax authorities to build a large database of e-commerce transactions and cross-border service provision," Mr. Thang said.

Confirming the issue of tax revenue losses in e-commerce, Ms. Nguyen Thi Minh Huyen, Deputy Director of the Department of E-commerce and Digital Economy ( Ministry of Industry and Trade ), stated that legal regulations on tax collection in e-commerce are still in the process of being perfected.

Furthermore, a large proportion of current e-commerce transactions are primarily COD (cash on delivery) transactions. The lack of a timely mechanism for data sharing, as well as information sharing among relevant regulatory agencies, is a factor causing tax revenue losses for cross-border businesses.

According to Ms. Huyen, the solution is to build and improve the legal framework in the field of e-commerce, and to establish a mechanism for sharing data and information through agreements signed between the two ministries. In addition, she suggested that the Ministry of Finance continue to apply digital technology in tax management for e-commerce, as well as promote the role of the e-commerce portal and provide e-commerce services abroad.

Professor Hoang Van Cuong, a member of the National Assembly's Finance and Budget Committee, believes that to combat cross-border tax evasion, it is necessary to focus on promoting synchronized digital transformation and having a complete digital database to facilitate easy and effective tax management. Investing in tax information management technology and sharing common data systems is essential. Tax authorities also need to more strongly apply automated technologies to manage e-commerce activities.

Along with the above solutions, in the last six months of 2023, the tax sector will strengthen inspections and audits in high-risk areas for tax fraud and evasion, and sectors with significant revenue potential such as e-commerce and digital platform businesses. It will also continue to strengthen revenue management for e-commerce businesses operating on electronic trading platforms…

Source: baodautu

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