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For retailers, tax evasion is business as usual
Many retailers in Ho Chi Minh City have been breaking the law for a long time by not writing invoices and evading value added tax, a local newspaper has reported after an in-depth investigation.
Nguyen Kim Shopping Center, an electronics chain appearing in the top ten list of biggest retailers in Vietnam last year, simply ignores a regulation that demands businesses issue a VAT invoice for every sale transaction worth VND100,000 or more, the Sai Gon Giai Phong reported.
In series of articles run last week, the newspaper said although the authorities have been tipped off about the illegal practice by the newspaper many times, the retailer keeps violating the rule because the penalties are too lenient. Nguyen Kim, which posts sales of up to VND7 billion per day, has only been asked to pay a fine of VND10 million for its violations over the past two months, the paper said.
Buyers of products and services pay VAT on purchases. For personal end-users, the tax cannot be recovered. By skipping the step of writing the VAT invoice, a retailer can offer lower prices and bigger promotions than their rivals in order to attract more buyers. Instead they will write informal receipts, only issuing the VAT invoice if customers insist.
Other large electronics retailers in the city, including De Nhat Phan Khang, Thien Hoa and Phong Vu, were also found violating the same rule.
Nguyen Dinh Xuan, a legislator representing southern Tay Ninh Province, said the practice of selling without VAT invoices had led to unhealthy competition among local businesses.
“A television, for instance, should retail at VND3.3 million including VAT, but a company sells it at only VND3 million without the tax. Then many other retailers will just follow suit or they won’t be able to sell the product.”
However, even if they do not receive their VAT invoices on purchases, it does not necessarily mean consumers can enjoy lower prices. Many retailers in the city actually collect the tax from buyers, they just don’t issue the official invoice for their own sake, the paper said.
As businesses must pay the difference between the output and input VAT (what they pay their sellers and collect from their buyers) to the government every month, many want to keep the gap in records as small as possible, and sometimes even in deficit, the newspaper reported, citing various sources.
Leading computer retailer Phong Vu, for instance, reported a VAT shortfall of nearly VND1 billion in the first half of this year.
Businesses in Vietnam declare taxes by themselves and are held responsible for any false declarations. The problem is tax agencies have not successfully monitored tax payments from businesses, allowing violations to continue unabated.
Taxing work
An official from the Ho Chi Minh City Tax Agency, who wanted to be unnamed, said the agency was understaffed and needed at least another 4,000 staff members.
Dang Khac Phuc, head of the tax office in District 1, said there are about 6,000 companies in the district, which means every tax officer has to oversee 180 businesses. It’s hard for them to read all the records, much less double check them, Phuc said.
Nguyen Nga, head of Tan Binh District tax office, said he knows that 99 percent of businesses are selling goods without issuing VAT invoices but the office can’t inspect all of them.
Officials also said that because they have to inform businesses three days in advance of an inspection, the latter have enough time to doctor the tax figures.
Xuan said unlike other countries, tax violations in Vietnam are not punished strictly enough.
“Harsh punitive measures are the ultimate answer to the problem as they will prevent businesses from avoiding tax liabilities,” Xuan said.
He said that it’s also time to hold tax officials accountable in case of tax violations by businesses.
Tran Du Lich, deputy head of the HCMC National Assembly delegation, said in the long term Vietnam needs to promote payment without the use of cash, which would enable better tax management.
However, as it would take time for all local consumers to get used to non-cash payments, the immediate solution is to impose strict penalties on violating businesses.
It is necessary to take measures to combat tax evasion, especially VAT, as right now tax revenues account for only 22 percent of all government budget sources, said lawmaker Nguyen Minh Thuyet from Lang Son Province.
The Sai Gon Giai Phong reported that if all the VAT dues were collected properly, around VND300 billion would be added to the government’s budget every day.
vietnamnet, tn, tt
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