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VEPR urges tax policies for FDI to be revised to prevent tax avoidance and evasion




Tax policies for FDI should be revised to prevent tax avoidance and evasion. —

HÀ NỘI — Việt Nam needs to revise tax and land policies for foreign direct investment (FDI) companies to ensure a level playing field for businesses.

That’s according to the Việt Nam Institute for Economics and Policy Research (VEPR) who say it is necessary to ensure companies pay correct taxes.

In the recent Việt Nam Annual Economic Report 2020 themed “Consolidating the base for fiscal policy”, VEPR pointed out that corporate income tax (CIT) avoidance and evasion was a global phenomenon that took place particularly in multinational companies.

Tax avoidance exploited gaps in customs and tax regulations to reduce payable taxes. Tax evasion was illegal acts so that tax liabilities were not required.

There are many channels of tax evasion and avoidance, including transfer mispricing, strategic location of intellectual properties, international debt shifting, tax treaty shopping, tax deferral, and corporate inversions.

“Industry 4.0 or the digital economy produces new business models that reduce the physical presence of businesses, while increasing the importance and mobility of intangible assets and increasing the integration of the value chain, therefore creating great challenges for the international tax system,” the report wrote.

According to VEPR, countries around the world were making great efforts to prevent tax avoidance and tax evasion with a series of tax system reforms, focusing on tightening regulations or increasing tax transparency.

In Việt Nam, tax violations in recent years occurred not only in corporate income tax (CIT) but also in other taxes.

“The act of tax fraud is becoming more and more complex, the scope is wider, the scale is bigger and the tricks are increasingly sophisticated,” VEPR stated.

VEPR estimated that on average, in the period of 2013-17, the tax revenue loss due to tax avoidance and evasion each year ranged from VNĐ13.3 trillion (US$573 million) to VNĐ20.7 trillion, equivalent to between 6.4 per cent and 9.9 per cent of the total CIT revenue.

These estimated figures were about four times larger than the number detected annually by the management agency agencies, according to VEPR.

For the FDI sector, the estimated annual tax revenue loss could reach VNĐ8-9 trillion and VĐ10.5 trillion for the non-State sector.

VEPR said Việt Nam would improve the existing policies and develop policies that were widely applied and recommended by developed countries and international organisations.

Gradually tightening the ceiling of tax deductible interest exposes companies with related party transactions and prevents tax base erosion and thin capital should be put into consideration, it said.

Excessive tax incentives should be abolished while a database for tax administration purposes should be improved together with enhancing information exchanges with other countries.

Focus should also be placed on tax administration regulations for e-commerce, digital-based business, and other services performed by suppliers in foreign countries without permanent establishments in Việt Nam.

According to Việt Nam Tax Consultants’ Association, it was necessary to improve the capacity of tax officials and auditors. The incentive policies for FDI must be revised to not only ensure a favourable business climate but also prevent tax avoidance and evasion.

Statistics of the Foreign Investment Agency showed there were more than 32,000 valid FDI projects in Việt Nam as of May 20 with a total registered capital of $376.6 billion. —



Vietnam fifth in global trade connectedness



Vietnam fifth in global trade connectedness

The Tan Cang – Cai Mep International Port in Ba Ria-Vung Tau, southern Vietnam.Photo by Shutterstock/Hien Phung Thu.

Vietnam ranked fifth globally last year in terms of trade connectedness, up five places from 2017, according to a recent report by logistics giant DHL.

With a score of 83 points, Vietnam ranked behind Singapore (92), the Netherlands (92), Belgium (91) and Malaysia (84).

Most countries and territories in the top 10 saw their ranks drop or remain unchanged. Trade is one of four pillars of the DHL Global Connectedness Index 2020, the others being capital, information and people. These pillars are measured by the quantity of traded goods, the amount of international investment and the number of migrants.

The overall ranking of Vietnam in the global connectedness index was 38 among 169 countries and territories, up one place from 2017. “Vietnam has become a serious competitor to China not only in textiles manufacturing, but also increasingly in high tech products,” the report said.

Shoeib Reza Choudhury, CEO of DHL Express Vietnam, said Vietnam was one of the top destinations of companies seeking to diversify their manufacturing, drawn by the young labor force, trade pacts and social stability.

Moving to Vietnam is most popular among hi-tech forms and garment companies, he added. The DHL Global Connectedness Index is compiled every two years to measure the state of globalization in 169 countries and territories.


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Businesses complain about new CIT payment regulation



Under the new regulation, by the end of the third quarter, enterprises have to estimate the amounts of tax of the fourth quarter and pay the amounts.

Some of the Decree 126 provisions effective on December 5 related to the Law on Tax Administration, say that the total amount of corporate income tax (CIT) that enterprises temporarily pay in the first three quarters of the year must not be lower than 75 percent of the CIT amounts they have to pay for the whole year.

Businesses complain about new CIT payment regulation

This means that by the end of the third quarter, enterprises have to estimate the amounts of tax of the fourth quarter and pay the amounts instead of the end of the fourth quarter as previously applied.

Dang Ngoc Minh, deputy general of the General Department of Taxation (GDT), told the press on the sidelines of the dialogue between enterprises and customs and taxation agencies held some days ago, that the state budget has a shortage and the purpose of the budget collection is to get money to pay for state management operations, especially to allocate to provinces that cannot cover expenses.

In other words, the budget collection progress plays a very important role in the operations of many localities.

Asked if GDT has received complaints about the new regulation from enterprises, he said these are just a few enterprises and they don’t represent the whole business community.

The official stressed that the tax collection must be done in reference to the local budget management and the benefits of society.

This means that despite the complaints, GDT is still determined to collect tax as planned.

What will happen if enterprises are fined not because they did not pay tax, but just because they did not anticipate the sharp increase in the amount of tax they would have to pay in Q4?

In replay, GDT said it believes that this may happen but not regularly, because enterprises can foresee their business performance.

But enterprises disagreed with GDT about the uncommon number of cases that saw revenue soaring unexpectedly in Q4.

“GDT always sets estimates on state budget collections every year. Will it dare to affirm that it can collect 75 percent of the total budget collections of the whole year by the end of Q3?” a businessman said. “Will it be fined if it fails to do this?”

The businessman went on to explain that no business dares to set revenue targets quarterly, but they only dare set for the whole year.

“Everyone wants to fulfill yearly business plans, but unexpected things always occur. Businesses were preparing for the year-end sale season, when new Covid-19 infections were discovered in HCM City,” he said.

According to GDT, the Decree 126 will take place on December 5. This means that enterprises, seriously affected by Covid-19, will not be affected by the new regulation this year, because the deadline for temporary tax payment was the last day of October, or Q3.

“Who dares to say he will make profit this Tet sale season? With the regulation, it is still unclear which businesses will take a loss and which will make a profit, but all of them now have to make temporary tax payments,” he said.

When the Decree 20 dated in 2017 on the tax administration applied to enterprises with transactions with related parties facing businesses’ complaints, the Prime Minister has repeatedly requested to amend the decree. It took three years to do this.

The decree covers only 8,000 businesses, 83 percent of which are foreign invested enterprises and 17 percent Vietnamese enterprises.

Meanwhile, the number of businesses to be affected by Decree 126 is much higher and the businesses are from many different economic sectors which face difficulties.

The regulation will have a big impact on enterprises and lead to serious consequences, even if it is amended later.

The director of an enterprise warned that businesses that have been hit hard by Covid-19 will become even worse because of the new regulation on temporary tax payment.

“You don’t have money, but you still have to pay taxes in advance, based on the estimated profit you may make in the future. It is just like taxing dreams,” he commented.

Meanwhile, according to GDT, the Decree 126 will take place on December 5. This means that enterprises, seriously affected by Covid-19, will not be affected by the new regulation this year, because the deadline for temporary tax payment was the last day of October, or Q3.

So, enterprises will only have to make temporary tax payment in accordance with Decree 126 by the end of October 2021. 

Duy Anh


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Vietnam says Oct. CPI up 2.47 pct on year

Vietnam estimated its consumer price index for October jumped 2.47 percent from a year earlier.



The General Statistics Office said in a report on Thursday that average inflation in the first ten months of this year rose 3.71 percent over the same period of last year.

October inflation slightly rise 0.09 percent against the previous month and December of 2019, the lowest growing rate since 2016.  

Increased prices in education sector and hike food prices due to floods in central region were the main driver of the month’s inflation.

Core inflation in October increased by 0.07 percent over the previous month and by 1.88 percent over the same period last year.

Average core inflation in the first 10 months of 2020 increased by 2.52 percent over the same period in 2019.

The government’s GDP growth target for this year is below 3 percent.

► Vietnam targets 2021 economic growth at 6 percent


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