Don't lose big tax revenue from small value goods

At the seminar "Enhancing the effectiveness of tax management for e-commerce", organized by the Government Electronic Information Portal on the afternoon of September 23, Associate Professor, Dr. Dinh Trong Thinh, former Head of the Faculty of International Finance - Academy of Finance, noted that there is a large loss of tax revenue for small-value e-commerce goods.

According to data from the Ministry of Industry and Trade , in 2013, the scale of Vietnam's retail e-commerce market reached 2.2 billion USD, by 2023 it will reach 20.5 billion USD, accounting for 8% of total retail sales of goods and consumer service revenue nationwide.

“From January to June 2024, each month there will be 1.3-1.9 billion USD worth of small goods crossing the border without paying tax. With 4-5 million orders crossing the border every day, if tax is paid, the number will be huge. Clearly, the policy mechanism is inconsistent,” Mr. Thinh cited statistics from the Ministry of Information and Communications .

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Speakers participating in the discussion. Photo: VPG

Meanwhile, many countries have abolished tax exemption regulations for small value goods.

The European Union has abolished duty-free travel for goods valued under 22 euros since 1 January 2021. Travel services under 135 pounds, which were previously duty-free, are now also subject to tax.

Or Thailand imposes a uniform tax on goods entering and leaving the country, all are subject to a 7% tax rate, regardless of small or large value.

“Revising and perfecting the policy mechanism is something that needs to be done immediately. The policy mechanism must be suitable for each specific condition and in accordance with the practice. In 2010, according to Decision 78 of the Government, we did not collect taxes on small amounts under 1 million VND to ease the problem of customs clearance during customs inspection.

But now it's different. In the digital economy era, procedures can be completed quickly in just a few seconds, there's no need to exempt taxes like that anymore," Mr. Thinh recommended.

Regarding this issue, Ms. Nguyen Thi Lan Anh, Director of the Department of Tax Management for Small and Medium Enterprises, Business Households and Individuals (General Department of Taxation) said: The Ministry of Finance has just submitted to the Government amendments and supplements to the Law on Value Added Tax, including a report on removing the regulation on exemption of value added tax for small retail goods.

E-commerce platform declares taxes on behalf of individuals/business households

Ms. Lan Anh said that the General Department of Taxation also reported to the Ministry of Finance to advise the Government and submit to the Prime Minister to amend and supplement Decree 123, including proposing content related to e-commerce tax management.

Specifically, organizations, individuals, and business households on the platform can authorize the e-commerce trading floor to declare and pay taxes on their behalf. This mechanism of declaring and paying taxes on their behalf only applies to e-commerce platforms with online ordering functions.

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If e-commerce platforms/floors declare and pay taxes on behalf of individuals/business households, it will reduce the number of people who have to declare and pay taxes. Photo: Minh Ngoc

Reference sources from the World Bank (WB) or the Organization for Economic Cooperation and Development (OECD) show that, in order to properly manage e-commerce activities, e-commerce platforms/floors should declare and pay taxes on behalf of individuals/business households, minimizing the number of people who have to declare and pay taxes.

This will reduce administrative procedures, reduce compliance costs for taxpayers with e-commerce business activities; and reduce costs that tax authorities have to spend to monitor taxpayer compliance.

In March 2021, the Council of the European Union stipulated new obligations for e-commerce platform operators to be responsible for declaring and paying taxes on behalf of e-commerce traders on the platform. This regulation has helped e-commerce traders feel secure in fulfilling their tax obligations to the state budget.

Some states in the US require e-commerce platforms to be responsible for declaring and paying taxes on behalf of e-commerce traders on the platform (both domestic and foreign).

In particular, China requires e-commerce platforms to declare information about trading activities through domestic and international e-commerce platforms. E-commerce platform owners must store this information for 3 years and provide it to Chinese tax authorities.

Many ministries and branches coordinate to manage e-commerce tax

Many ministries and branches are actively coordinating with the General Department of Taxation and the Ministry of Finance to improve the efficiency of e-commerce tax collection.

Total tax revenue from e-commerce activities has increased sharply from several thousand billion VND in 2021 to 83,000 billion VND in 2022, 97,000 billion VND in 2023, and in just the first 7 months of 2024, it was over 78,000 billion VND.

For about a year now, the Ministry of Industry and Trade has coordinated with the General Department of Taxation - Ministry of Finance, and the Ministry of Information and Communications to build and complete a shared database on e-commerce.

On the e-commerce management portal at online.gov.vn, there is quite complete data on businesses that own e-commerce websites and e-commerce trading floors that have completed notification and registration procedures with the Ministry of Industry and Trade.

“We have shared with the General Department of Taxation data of more than 1,000 entities that own e-commerce platforms in the form of websites or applications; in the future, we will share data of about 50,000 entities that own e-commerce websites for selling goods,” said Ms. Lai Viet Anh, Deputy Director of the Department of E-commerce and Digital Economy, Ministry of Industry and Trade.

Mr. Tran Minh Tuan, Director of the Department of Digital Economy and Digital Society, Ministry of Information and Communications, said that this agency has just provided the General Department of Taxation with information on 14 foreign organizations and individuals engaged in cross-border advertising activities; 24 business organizations and individuals engaged in cross-border digital advertising activities with foreign organizations; and 6 foreign enterprises providing radio, television, and pay television services from abroad.

"We have also cross-checked data of 86 telecommunications enterprises on telecommunications activity figures and .vn domain name databases with e-commerce activities," said Mr. Tuan.