The Covid-19 pandemic has become a golden opportunity for many of Vietnam’s e-commerce companies as record numbers of consumers shop online through online portals and social networks such as Facebook. But while the ease and convenience of online shopping has been great for consumers, the Vietnamese government has lost millions of dollars in potential tax revenue since there are no regulations related to online shopping.
As well as online shopping platforms and social networks, video-streaming platforms such as Netflix from the U.S., WeTV from China and Iflix from Malaysia have also seen rapid growth in the number of users and revenue from Vietnam.
Netflix, which started providing services to Vietnam’s consumers in early 2016, is estimated to have 300,000 users, with each user paying between $6 to $12 USD per month. On the top end, this means that Netflix is potentially earning as much as $3.6 million USD per month, but the government isn’t receiving any tax revenue from transactions.
Nguyen Duc Huy, Deputy Chief Officer of the General Department of Taxation, told Vietnam’s Vanguard Newspaper that Netflix has not set up a branch in Việt Nam yet and that most Netflix subscribers in Vietnam who are register to use the service pay their fees online or by credit card.
According to Nguyen, Netflix has neither set up a registered office in Vietnam, nor undertaken the procedures to obtain a license to provide online TV services in the country and this is leading to tax losses. However, under current tax codes, the government doesn’t have specific sanctions for this case.
Another tax official, Vien Viet Hung, Deputy head of Hanoi Taxation Department said that there are also many individuals are earning an income from YouTube, Facebook and app markets such as the Apple iOS Appstore and the Google Playstore.
According to the Law on Value Added Tax (VAT) and Personal Income Tax (PIT) for residents, any individual having business activities with income from a business with turnover from 100 million VND a year or more must pay tax. By the government’s definition, this means that any person receiving income from Facebook, Google and YouTube is classified as business individuals, and should be paying 5% Value Added Tax (VAT) and 2% Personal Income Tax (PIT).
Tax authorities have identified more than 1,100 individuals operating in electronic services, online games and software and these individuals had a total income of $208 million USD between 2016 and 2019. One individual had income of more that $6 million USD but as with others, paid no taxes on his income.
Dang Ngọc Minh, Deputy Director of the General Department of Taxation said the tax industry has co-operated with relevant agencies to control the money flow transferred from abroad to local organisations and individuals and this is helping identify individuals who are earning money through e-commerce activities.
Data from commercial banks show that there were more than 18,300 people who opened bank accounts and were receiving payment from Google, Facebook, YouTube, with total income of $63 million USD. The total amount of tax, fines and late payment interest collected from these accounts on foreign social networks was over $600,000 USD.
In order to manage and collect taxes from organisations and individuals in e-commerce and online services, the tax department plans to work with the Ministry of Public Security and the Ministry of Information and Communications to identify taxpayers. They will also collect data from, banks, credit card and e-wallet companies, intermediary apps and shipping companies to determine cash flow and will then identify those individuals who need to pay taxes.
Whether the government can also get the major international e-commerce and social networks to register in Vietnam and pay taxes on their revenue from consumers and business remains to be seen, but one thing is for sure, the government regulators are looking at their options and plan to collect taxes from these companies as soon as relevant laws and regulations are in place.