The Vietnam Federation of Commerce and Industry (VCCI) has just issued a document providing comments on the Draft Decree detailing the Law on Tax Administration on temporary suspension of exit from the country of the Ministry of Finance.

Raise the tax debt threshold to 200 million for individuals and 1 billion for businesses

Many businesses have reported to VCCI that the threshold for tax debt to apply the exit ban measure stipulated in Article 1 of the Draft - VND10 million for individuals and VND100 million for businesses - is too low.

In most cases, the legal representative of a company goes abroad not to avoid tax obligations, but to conduct business transactions with partners. Such transactions can help the company generate revenue, thereby continuing to pay taxes. If a broad-based exit ban is applied, it could have a negative impact on production and business activities.

Therefore, VCCI proposed that the drafting agency consider raising the threshold for tax debt to apply the exit ban measure to 1 billion VND for enterprises and 200 million VND for individuals.

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VCCI proposed raising the threshold for tax debt to apply the exit ban measure to 1 billion VND for businesses and 200 million VND for individuals. Photo: Binh Minh

On the other hand, it is necessary to reconsider Article 1.3 in the draft, which stipulates that in case an enterprise ceases to operate but has not fulfilled its tax obligations, the legal representative will be temporarily suspended from leaving the country regardless of the value of the tax amount.

In fact, there are cases where the tax arrears are very small, arising after the business has ceased operations (such as business license fees). With such a small value, the cost of collection will be greater than the amount collected.

VCCI recommends that the drafting agency add regulations on the threshold of the amount of tax owed in this case, for example 3 million VND (equal to the highest business license fee in a year).

Only temporarily suspend exit after there is an administrative decision on tax management.

VCCI also noted that Article 1 of the draft specifically stipulates the debt threshold and tax debt period for different subjects, in which Clause 1 applies to business individuals and business household owners and Clause 2 applies to individuals who are legal representatives of enterprises, cooperatives and cooperative unions.

For individuals, simply owing overdue taxes and the amount of money is enough to be subject to temporary exit suspension, without requiring an administrative decision on tax management. As for businesses, temporary exit suspension for legal representatives is only applied after an administrative decision on tax management. Such different regulations are not really appropriate and equitable.

On the other hand, determining whether an individual/business owner owes tax is entirely based on information stored internally at the tax authority, and is not an administrative decision presented to the public.

In fact, for various reasons, there are many cases where the information stored at the tax authority is incorrect, misleading or incomplete, leading to inaccurate determination of tax obligations. Only when conducting tax inspections and examinations and issuing tax administrative decisions will this information be checked, compared and carefully reviewed according to a complete procedural order.

“Restricting people's right to travel (exit) is a rather serious measure, so it needs to be implemented according to stricter procedures, that is, there needs to be an administrative decision on tax management signed and issued by a competent person to avoid unnecessary confusion,” VCCI recommended.

When will the temporary suspension of exit be lifted?

Article 2.3 of the Draft stipulates that the tax authority shall issue a document on temporary suspension of exit to the immigration authority. However, the Draft does not have any provisions on lifting the temporary suspension of exit. This may be a legal gap that causes difficulties in the application process.

VCCI proposed that the drafting agency stipulate that as soon as the tax debtor has paid the tax, the temporary exit suspension measure will be lifted immediately.

At the same time, research a mechanism to allow people who are temporarily suspended from leaving the country to pay taxes or pay an advance amount equivalent to the tax debt right at the border gate. Thereby, helping the State to collect money soon, while also creating conditions for tax debtors to immediately have the temporary suspension of exit removed so that they can travel normally.

To enforce administrative decisions on tax management, tax authorities have many measures such as withdrawing money from bank accounts, notifying invoices that are no longer valid, seizing and auctioning assets...

VCCI believes that priority should be given to applying these measures, especially the measure of withdrawing money from bank accounts or other third parties, before considering measures to restrict people's right to travel.

VCCI proposed that the drafting agency supplement regulations on tax debt thresholds and tax debt periods for temporary exit suspension for Vietnamese people leaving the country to settle, Vietnamese people settling abroad, and foreigners.

The Ministry of Finance proposes that debt of 10-100 million VND will be temporarily suspended from leaving the country, is the threshold high or low? The tax debt threshold of 10 million VND for individuals and 100 million VND for businesses is appropriate in Vietnam today but much lower than in many other countries. There needs to be a mechanism to monitor administrative agencies to avoid abuse of power in deciding to temporarily suspend exit.