INCREASING TAX EVASION IN E-COMMERCE

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

Hà Nội Tax Authority said it collected just VNĐ14 trillion (US$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 VNĐ100 million ($4,412) per year. That means taxable stores only accounted for around 10 per cent.

Nguyễn 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 Việt Nam 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.

Nguyễn Thị Lan Anh, director of 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 Việt Nam that have managed to fulfil tax obligations so far.

“From 2018 to late October 2021, these firms were paying a total tax of VNĐ4,263.82 billion ($187.8 million). Notably, Facebook made a contribution of VNĐ1,641.75 billion, Google VNĐ1,573.24 billion and Microsoft VNĐ560.67 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 to carry out. Notably, some foreign firms refuse to pay tax on grounds of their absence of a business location in Việt Nam, Anh added.

Given the situation at hand, 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 of firms and individuals, thereby avert tax evasion on online platforms.

Source: VNS