Illustrative image (Photo: Vietnam+) Hanoi (VNA) - Many solutions have been proposed to manage taxes with cross-border e-commerce transactions such as requiring foreign businesses to open offices, branches or servers in Vietnam. But, up to now, the ability to implement these ideas is still open questions.
It is also one of the challenges that were raised at the conference "Tax management in the digital platform" recently held on May 8.
The concept is outdated
Luu Duc Huy, Director of Policy Department under the General Department of Taxation stated that the management of tax collection on cross-border e-commerce transactions is still inadequate, especially for incomes yielded from social networking sites including Google, Facebook and Youtube.
According to him, businesses and individuals have transactions with high growth rates. Some businesses have annual revenue of hundreds of billion VND while individuals also have income of tens of billion VND per year.
These incomes are transferred to beneficiaries in Vietnam through commercial banks in the country. However, he emphasized, only a few businesses make tax payment declarations.
Sharing this view, Dang Ngoc Minh, Deputy Director of the General Department of Taxation said the biggest challenge currently is to manage taxation with cross-border goods and service providers.
As regulated, a foreign enterprise must pay corporate income tax when it has a facility. Through this facility, that enterprise does its production and business activities in Vietnam.
However, the official pointed out that businesses may not need to be present in a country to provide services in that market. Therefore, the old concept with a physical business is no longer suitable in the digital era.
"We should find a new definition for a permanent facility of a firm involving in digital business. That can no longer be based on old mindsets," Minh said.
Agreeing with the viewpoint, Jonathan Leigh Pemberton, World Bank senior tax expert maintained that, notions of a permanent establishment existed for hundreds of years ago and has become outdated.
Another problem posed by Deputy Director of the General Department of Taxation Dang Ngoc Minh is that the provision of online services helps businesses avoid payment of value added tax. This leads to a difference between traditional businesses and online ones.
Setting up websites for foreign businesses to pay taxes
To deal with the issue, the World Bank official recommended using banking systems instead of tax authorities as a solution.
However, according to him, it is difficult for commercial banks to identify digital services-related payments and what other payments are.
The World Bank representative mentioned another solution is to set up an online payment gateway for foreign suppliers to easily declare and pay taxes.
"In principle, end-users pay value-added tax but we have to create a mechanism for suppliers to declare and pay taxes to users," he said.
Dang Ngoc Minh reiterated a number of previous proposals that it is to regulate so that service providers, for example, Facebook and Google have offices in Vietnam.
Minh also expressed his support for the solution to build a national one-stop payment gateway to control payments.
Vietnam edged up 13 spots to 69th place in the World Bank Group’s annual ease of doing business rankings between 2015 and 2018. However, its index on cross-border trade fell by seven spots from 93rd to 100th place among 190 economies.
Despite recent improvements, import and export procedures have yet to be on par with those in other countries. In addition, customs clearance procedures on goods subject to specialized inspections are still lengthy, complicated and costly./.
