Vietnam : Tax evasion increasing as e-commerce expands

The COVID-19 pandemic has sparked a boom in e-commerce in Vietnam as consumers shift their spending habits towards online platforms. However, as online sales continue to grow, so does tax evasion.

The Hanoi Tax Authority said it collected just VND14 trillion Vietnamese dongs ($618.2 million) in tax from firms and individuals engaging in e-commerce in 2021. Such a small figure does not reflect the actual size of business on online platforms, suggesting there are firms and individuals involved in tax evasion.

The tax authority admitted that in e-commerce, it is more difficult to collect tax from individuals and households than from firms as the former normally manoeuvre themselves out of income tax.

Recently, the tax authority has gathered information on more than 32,800 online stores in the city. Among these stores, only 3,388 reported revenues of over VND100 million ($4,412) per year. That means taxable stores only accounted for around 10%.

Nguyen Minh Phong, an online seller, revealed that individuals doing business online have many ways to hide their actual income. They may ask their customers to pay in cash, create different accounts with different names to subdivide revenues or declare lower earnings. Their practice amounts to tax evasion and causes a huge tax loss to the State budget every year.

Many content creators on various online platforms including YouTube have been avoiding paying tax as well. According to the Ministry of Information and Communications, there were about 15,000 money-making YouTube channels in Vietnam by late 2020, of which 350 have more than one million subscribers.

However, tax authorities can hold just 5,000 channels liable for tax income. The rest are failing to declare income, making dishonest declarations or evading tax via international payment gateway such as Paypal and Payoneer.

Nguyen Thi Lan Anh, director of the Tax Administration Department on Small and Medium Enterprises and Business Households and Individuals, reported that there are about 14 foreign tech giants and eight cross-border e-commerce websites in Vietnam that have managed to fulfil tax obligations so far.

“From 2018 to late October 2021, these firms were paying a total tax of VND4,263.82 billion ($187.8 million). Notably, Facebook made a contribution of VND1,641.75 billion, Google VND1,573.24 billion and Microsoft VND560.67 billion,” Anh said.

However, according to Anh, such an amount of tax is tiny given the large-scale of the e-commerce industry.

The director believed the tax loss in small-scale businesses could be attributed to taxpayers’ failure to make tax declarations, tax authorities, inability to find taxpayers’ business locations and taxpayers’ business taking place beyond nine-to-five.

Regarding cross-border e-commerce, taxpayers normally fail to make business registrations or have no fixed business location whatsoever, rendering tax collection impossible. Notably, some foreign firms refuse to pay tax on the grounds that they do not have a business location in Vietnam, Anh added.

Given the situation, experts believe tax authorities should step up the application of technology in tax collection, such as Big Data, IOT and AI, to better gather information on firms and individuals, thereby averting tax evasion on online platforms.

Viet Nam News / The Japan News – February 4, 2022