Increase tax revenue from Google, Facebook, TikTok…

Paying taxes is not commensurate with potential

In the first 6 months of 2023, cross-border technology service providers such as Google, Apple, Facebook, Netflix, TikTok, Microsoft, etc. paid nearly 4,000 billion VND in taxes. Previously, in 2022, cross-border technology businesses paid nearly 3,500 billion VND.

However, the above tax amount is not correct and not enough for the actual business situation of those "big guys". In the e-commerce sector alone, 6 major foreign suppliers, including Meta (Facebook), Google, Microsoft, TikTok, Netfix, Apple, account for 90% of the market share of e-commerce service revenue, cross-border digital business in Vietnam. In 2022, the revenue of Vietnam's retail e-commerce market is estimated to reach 16.4 billion USD.

In the digital advertising segment, according to Kantar Media Vietnam, revenue on platforms such as Facebook, Youtube and TikTok in 2022 is expected to be around 2.5 billion USD. In 2023, the figure is expected to be 3.4 billion USD, equivalent to 80,000 billion VND.

Vietnam has only collected a small amount of contractor tax declared and paid by Vietnamese enterprises, while for cross-border enterprises, it has not collected related taxes because they have not accepted to set up offices and legal entities in Vietnam. According to current regulations, the tax rate for e-commerce business for individuals and business households is from 1.5-10%. Thus, the State is losing tens of thousands of billions of VND.

Along with tax losses, tax authorities have recorded tax evasion and tax avoidance by cross-border service providers.

Mr. Nguyen Bang Thang, Director of the Large Enterprise Tax Department (General Department of Taxation), said that the tax authority will continue to create the most favorable conditions for foreign suppliers and domestic organizations to operate seriously to develop their business in Vietnam. However, the tax authority will also apply strict sanctions and handle violations according to the law against organizations that deliberately violate tax regulations.

A typical sign of tax law violation is TikTok Shop. According to the tax authority, for over a year, many businesses and individuals have not registered for tax, but have avoided the 10.8% tax by choosing to buy advertising through rented accounts from agents with official contracts with TikTok in Vietnam. These agents openly offer tax-free account rental services and use many ways to minimize the issuance of invoices to customers, so as not to have to declare taxes, causing the risk of losing state budget revenue.

Solutions against tax loss

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

Affirming the situation of tax loss in e-commerce, Ms. Nguyen Thi Minh Huyen, Deputy Director of the Department of E-commerce and Digital Economy ( Ministry of Industry and Trade ) said that legal regulations on tax collection in e-commerce are still in the process of completion.

In addition, the majority of e-commerce transactions today are COD (cash on delivery) transactions. The lack of a timely mechanism for sharing data and information from relevant management agencies is a factor causing tax losses for cross-border businesses.

According to Ms. Huyen, the solution is to build and perfect the law in the field of e-commerce, with a mechanism for sharing information data through an agreement signed between the two ministries. In addition, it is recommended that the Ministry of Finance continue to apply digital technology in tax management with e-commerce, as well as promote the role of the Electronic Information Portal and provide e-commerce services abroad.

Prof. Dr. Hoang Van Cuong, Member of the National Assembly's Finance and Budget Committee, said that to combat cross-border tax losses, it is necessary to focus on promoting synchronous digital transformation and having a complete digital database to make tax management easy and effective. Investing in tax information management technology and sharing common data systems is essential. Tax authorities also need to apply more automation technology to manage e-commerce activities.

Along with the above solution, in the last 6 months of 2023, the tax sector will strengthen inspection and examination of areas with high risks of fraud and tax evasion, industries and fields with large revenue potential such as e-commerce, digital platform business... Continue to strengthen revenue management for e-commerce businesses on electronic trading floors...

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