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E-commerce needs better legal framework to prevent tax loss: insiders

The fast-growing e-commerce sector is making big money but its tax payments are not commensurate with its revenues, exposing the need for a better tax policy to prevent losses, according to insiders.

Nguyen Thi Lan Anh, Director of the Tax Administration Department for Small and Medium Enterprises, Business Households and Individuals, said the Ministry of Finance has launched a digital tax portal for foreign service providers (FSP) and an eTax Mobile app for individuals to facilitate tax collection.

Thirty-six FSPs have registered and fulfilled their tax obligations via the portal so far, including six big names - Meta (Facebook), Google, Microsoft, TikTok, Netflix and Apple - which collectively account for 90% of cross-border e-commerce in Vietnam.

The director also said the tax authorities have developed an AI-powered database to manage tax risks in e-commerce. The database will give warning signals any time it detects a case exceeding risk thresholds and put forward a solution to deal with the excessive risks.

"If tax evasion is detected, the tax authorities will take the case to the police," she added.

Nguyen Thi Minh Huyen, Deputy Director of the Vietnam E-Commerce and Digital Economy Agency, noted that tax payments in e-commerce fall under the scope of Decree 85, which has been issued to add regulations to online trade and ensure traditional commerce and e-commerce be equally regulated.

Under the decree, e-commerce platforms are required to appoint a contact point, which is tasked with disclosing information to regulatory authorities on e-commerce violations. Disclosure must be made within 24 hours from the receipt of the authorities' request to facilitate ensuing investigations.

They are also required to settle consumers' complaints about goods and services provided by foreign sellers on those sellers' behalf and notify them of their tax obligations on the platforms.

"E-commerce platforms are held responsible for information disclosure when it comes to tax management," she said.

Nguyen Thi Thanh Huyen, Head of the Electronic Information Office, Authority of Broadcasting and Electronic Information, revealed that her authority is developing a draft amending Decree 72 on Internet services and online information.

Under the draft, social networking platforms are obliged to request online accounts, community pages and content distribution channels operating on the platforms to disclose information on revenue-generating activities to regulatory authorities.

She said the disclosure is essential as it allows the authorities to monitor cross-border cash flows, which could be used to verify tax declarations and detect tax evasion.

She also said her authority and the General Department of Taxation are cooperating closely to monitor cross-border tax payments on the e-Tax portal.

"It will take from now until year-end to verify whether the firms have fulfilled their tax obligations," she said.

Hoang Van Cuong, Member of the National Assembly's Finance-Budget Committee, called for a broader legal scope for e-commerce taxation to prevent tax loss.

He took cryptocurrencies as an example. He said cash-flow-based taxation does not cover transactions made in cryptocurrencies since such currencies have not been legally recognised in Vietnam.

As cryptocurrency-denominated transactions generate revenues for taxpayers, the lack of recognition has held the transactions untaxable, causing tax loss.

Over 90% of internet users in Vietnam engage in online shopping. The country's e-commerce revenues were estimated at 13.7 billion USD in 2021, up 16% year-on-year and contributing to 6.5% of total retail revenues./.