Find a new approach to e commerce business tax administration

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find a new approach to e commerce business tax administration
Mr. Nguyen Viet Anh, senior expert of the World Bank.

Currently, the Ministry of Finance is consulting on a draft circular guiding a number of articles of the Law on Tax Administration No. 38/2019/QH14 and Decree No. 126/2020/ND-CP, of which, one of the most important contents is related to e-commerce tax administration. How do you evaluate this in the draft?

We believe that this is an important issuethat contributes to the concretization of the provisions of Clause 4, Article 42 of the Law on Tax Administration No. 38/2019/QH14 on the obligations of suppliers to register, declare and pay taxes.

Foreign level does not have a permanent establishment in Vietnam to conduct e-commerce business, digital-based business. This is an important basis for Vietnam to promptly manage revenues from these emerging businesses.

We found the draft takes a similar approach to good international tax administration practices for foreign suppliers such as centralized management at the General Department of Taxation based on an online foundation with simplified procedures.

However, there are also many issues that need to be further considered to ensure the feasibility of regulations, improve management efficiency as well as reduce the compliance burden of taxpayers.

Could you share with us some good experiences of other countries in the world in tax administration for e-commerce?

Tax administration for e-commerce and digital business activities is a relatively new sectorfor many tax authorities around the world. However, going deeper into the specific content can be divided into two cases.

Regarding direct tax, it can be affirmed that this is a very new issueand currently, countries have not found a solution with a consensus on how deal with the direct tax for businesses operating on adigital basis, earning income from doing business in a country but having no presence in that country. This is a content that has been discussed in several rounds within the framework of the BEPS forum initiated by the G20/OECD, but the final results are not yet available.

For indirect taxes, particularly value added tax, taxation on goods and services, including digital services provided through e-commerce transactions and digital platforms, there are good international practices. EU countries as well as many countries surrounding Vietnam such as Australia, Malaysia, Indonesia, and Thailand have issued regulations as well as prepared infrastructure to manage e-commerce taxes from these transactions.

In fact, most e-commerce transactions and digital economic transactions are done through electronic markets or digital platforms. The number of suppliers is hundreds of thousands or millions of suppliers. Although the number of transactions is high, the value of each transaction is usually low. Managing this group of people is a big challenge for tax authorities. Meanwhile, the compliance with the obligation to declare and pay taxes is also a burden for suppliers, often individuals and small businesses.

In this context, many countries have specified that, with transactions on e-commerce floors or digital platforms, the obligation to declare and pay VAT on transactions via e-commerce floors or digital platforms belongs to the e-commerce exchanges or these digital platforms.

On the side of e-commerce floors or digital platforms, most of these operate on an international scale and are familiar with this regulation in other countries, so they have the understanding and foundation to follow it. Therefore, this provision does not impose any additional burden on them. This regulation has been applied by many countries, for example in the EU, or near Vietnam such as Australia and Malaysia. Many other countries are also drafting regulations in this direction for the indirect taxation of e-commerce transactions.

In addition, the General Department of Taxation may consider applying this regulation to groups of individuals and individual business households in the country operating on e-commerce floors, as well as domestic and foreign digital platforms.

In your opinion, in the legal corridor, what should be noted about tax administration with e-commerce business in Vietnam to avoid tax losses and lagging behind other countries in the world?

In fact, tax administration for e-commerce is a relatively new job with rapid development and fluctuation. Therefore, in order to keep up with the growth of these business models, it requires tax authorities to take a new approach. In my opinion, there is an important content that is building cooperative relationships with businesses in the industry as well as industry associations in the digital economic value chain, so that there are appropriate management solutions while ensuring strict management of revenue sources and facilitating the development of the industry.

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