On July 9, the General Department of Taxation announced that the budget revenue in the first 6 months of the year still increased by 14.3% compared to the same period last year. Specifically, the budget revenue in the first 6 months of 2021 reaches VND 656 trillion, equivalent to 58.8% of the estimated number. This figure will certainly be higher if our government can strictly control the taxation of business services on cross-border platforms such as Facebook, Google, YouTube, etc.
According to the General Department of Taxation, there have been 1,092 website owners identified as subject to tax in Ho Chi Minh City through a review of 14,951 websites. However, among that number, only 56 individuals voluntarily on tax declaration and payment.
In Vietnam, there are about 15,000 Youtube channels with the monetization button enabled. Of these, only 5,000 channels which are equivalent to about 30%, are managed by Youtube’s network companies in Vietnam and have fully declared and paid taxes. The rest still went rogue outside of the regulations and collect money from viewers, advertising without paying tax.
The two models above show that the annual loss of tax revenue from organizations and individuals doing business in e-commerce on cross-border platforms is immense, possibly up to thousands of billions of VND. Furthermore, this avoiding of tax payment also creates an unfair competitive environment in many fields and makes individuals and organizations that strictly fulfill their tax obligations to the state feel cheated, inequality, injustice, etc.
Changes in the obligations to pay tax in Circular 40
According to Circular 40 of the Ministry of Finance, from the beginning of August 2021, services such as sauna, massage, karaoke, discotheque, billiards, Internet, games; tailoring and laundry services; haircut, hairdressing, hair washing are on the list that is the subject of 5% value-added tax and 2% personal income tax. This is the second-highest tax rate in the list of flat tax calculations for business households and individuals.
However, in the context of the current Covid-19 epidemic with the continuing blockade and social distancing across the country, the service industries such as haircuts, karaoke, tailoring, laundry, etc. are the ones that have suffered the most. Therefore, many experts have been proposing to postpone Circular 40 to 2022.
Circular 40 also stipulates that organizations that are partners in Vietnam of overseas digital platform providers without a permanent establishment in Vietnam must declare and pay on behalf of individuals all business cooperation revenue. Though, this only applies when there is an agreement to pay income to individuals who earn income from digital information content products and services through a partner organization in Vietnam.
Make online platforms fulfill their tax obligations
On a legal basis, we have had regulations such as the Law on Tax Administration, Decree 126/2020… Nonetheless, we still need new tools and methods to make businesses like Facebook, Google comply with regulations on tax declaration and payment.
The view of expanding the tax base instead of increasing the tax rate is to ensure fairness in business activities. Haircutting services still have to pay taxes, so there’s no reason why online platforms like YouTube and Google don’t have to pay taxes.