Collecting personal taxes on online businesses: Need for "sweeping" technology

"Sweeping" anonymous business individuals on cyberspace

According to statistics from the General Department of Taxation, as of early October 2023, there were 74 foreign suppliers from many countries such as the United States, the Netherlands, South Korea, Singapore, Ireland, Lithuania... with world-leading names such as Meta, Google, Apple, Tiktok, Samsung... registering, declaring and paying taxes through the electronic portal for foreign suppliers, with the tax collected only 11,498 billion VND. Meanwhile, revenue from cross-border businesses is estimated at billions of USD/year. This shows that tax collection in online business still faces many difficulties.

In fact, in recent times, the authorities have made great efforts to collect taxes on e-commerce platforms. Specifically, after more than a year of operating the electronic information portal for foreign suppliers, the E-commerce Information Portal (operated from December 15, 2022) with 3 information provision periods is also "sweeping" about 350 e-commerce trading floors. Thanks to that, the tax sector is capturing information of more than 191,000 organizations and individuals doing business on the floor with a total accumulated transaction value of 44.5 trillion VND.

Currently, many people selling through online channels do not fully understand the regulations on tax payment. Illustrative photo

Information about organizations and individuals doing business on the floor includes: name, tax code/business registration/citizen identification number, email, phone number, address, product line, bank account, transaction value through the floor... This is valuable data for tax authorities to have a basis for calculating taxes and managing individuals doing business that seem to be easily anonymous in cyberspace.

For that reason, recently, many sellers on e-commerce platforms have urged and asked each other to register for taxes in advance, to avoid being invited by the tax authorities to work, collect back taxes for many years, and fine tens of millions, hundreds of millions of dong for late payment, even higher than the amount of tax payable.

Ms. Pham Ngoc Lan - Cau Giay, Hanoi said that she is currently selling fashion accessories. Besides traditional sales, she has approached the form of selling on social networks.

According to Ms. Lan: "Recently, many stores have been charged with back taxes, which makes me very worried and I am asking for information related to tax regulations. Because I do not understand, I am very concerned about tax collection for this business activity."

According to the General Department of Taxation, Article 4, Circular 40 of the Ministry of Finance, effective from August 1, 2021, stipulates that individuals and business households will have to pay value added tax and personal income tax when their revenue exceeds VND 100 million in a year. However, not all sellers are aware of this regulation.

Tax law stipulates that in case a business household or individual conducts business activities, regardless of whether they have registered for business or not, and are not subject to tax exemption, they must pay taxes according to the provisions of law such as value added tax, personal income tax, and business license fees. Article 33 of the Tax Administration Law No. 38 clearly states that business individuals must register for tax within 10 working days from the date of commencement of business activities.

Meanwhile, according to regulations, tax management is currently implemented according to the self-declaration and self-payment mechanism. Therefore, tax management for individuals doing online business still faces many difficulties, especially for individuals doing online business without business registration.

Technology is needed for effective tax collection

The explosion of information technology has led to the strong development of buying and selling activities and business through social networks, especially cross-border e-commerce platforms. Sharing about this issue, Master Nguyen Nam Trung, Lecturer of the Faculty of Law, University of Economics and Finance, Ho Chi Minh City, said that cross-border e-commerce brings a large source of income to many individuals and organizations. However, it also brings many challenges to tax management.

In practice, current legal regulations on tax management have not yet resolved all the problems encountered and there are still many loopholes that need to be overcome. Therefore, it is necessary to quickly find solutions to help improve the effectiveness of tax management for cross-border digital service provision activities.

In particular, the most important thing is to build and develop an information technology system to support and manage tax declaration, calculation and payment in a convenient and complete manner.

Experts say that in order to collect taxes from technology platforms, management agencies must have technological tools that can keep up with the development of current digital platforms.

Experts also believe that in order to collect taxes from technology platforms, management agencies must have technological tools that can keep up with the development of current digital platforms. However, reality shows that management agencies are often behind businesses in terms of technology. That is an extremely big challenge in collecting taxes from cross-border digital platforms.

Regarding the reasons for the difficulties in tax management for individuals doing online business in Vietnam today, especially for individuals doing online business without registering their business, MSc. Nguyen Thanh Minh Chanh, Lecturer of the Faculty of Law - Ho Chi Minh City University of Industry, said that individuals doing business on online platforms on a small scale, spontaneously, and not considered traders will not have to register their business. However, the distinction and management of these so-called small-scale entities with online traders still needs a clear and transparent mechanism.

Meanwhile, some legal regulations on this issue are still inappropriate and lacking in updating. This leads to the omission of tax management for a large number of subjects that promise to contribute significantly to the overall national economy.

Therefore, it is necessary to define the concept of e-commerce and identify the subject as an individual subject to tax within the territory of Vietnam and outside the territory of Vietnam, as well as the principle of tax calculation with no difference between e-commerce and traditional commerce to ensure fairness and efficiency. To solve this, it is necessary to develop a flexible, transparent and compliance-encouraging tax system.

Emphasizing the scale and explosive growth of this sector in recent times, Mr. Nguyen Huu Tuan, Head of the Department of E-commerce Management, Department of E-commerce and Digital Economy (Ministry of Industry and Trade) said that the e-commerce sector in Vietnam last year witnessed a growth rate of about 20% and reached 16.4 billion USD, with each person spending at 300 USD/year. The rapid growth rate makes it difficult to avoid problems such as counterfeit goods, fake goods and tax losses.

Payment, shipping, and delivery infrastructure have all changed to meet new business models in this field such as: dropshipping (a sales model that does not require storing goods), print on demand (selling designs on demand), affiliate marketing (introducing products/services to new customers through sending links)...

According to Mr. Tuan, tax authorities must clearly understand the characteristics of each type of e-commerce and the main revenue comes from selling goods and services; receiving commissions on services; revenue from advertising, providing services... only then will there be a basis for calculating taxes.

With the characteristics of the digital economy and the rapid development of e-commerce, there are many challenges for the management of business activities through e-commerce platforms as well as tax management. Therefore, in addition to strengthening the construction and development of a strong enough information technology system to "sweep" taxes, functional sectors must synchronously implement many solutions to both ensure the rights and obligations of online businesses and avoid loss of budget revenue for the State.

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