To delve deeper into this issue, Saigon Investment conducted an interview with Dr. NGUYỄN NGỌC TÚ, a seasoned tax industry professional with 30 years of experience, currently serving as a lecturer at the Hanoi University of Business and Technology.
Dr. Tú emphasized that the current tax management approach for business households relies heavily on presumptive taxes, a method that lacks accuracy and transparency. This reliance on presumptive tax rates results in a significant loss of revenue for the state budget.
JOURNALIST: - Sir, could you explain the reasons behind the revenue loss?
Dr. NGUYỄN NGỌC TÚ: - Currently, there are approximately 6 million officially registered business households nationwide, of which 5-10% are considered large business households that follow formal tax declaration procedures. These larger entities maintain basic accounting records akin to those of conventional businesses. However, the remaining 90% of business households continue to pay a flat tax rate. I must stress that presumptive taxes are inherently imprecise.
Presently, presumptive tax calculations occur annually but only for registered households, making it challenging to assess those conducting business on a regular or temporary basis. Even local tax authorities have limited knowledge about the actual number of business households. Furthermore, of the 6 million registered households, only approximately 3 million effectively manage and pay taxes, meaning that about 3 million business households go unaccounted for.
We recognize that keeping accurate accounting records and invoices is crucial for determining revenue and subsequently calculating taxes. However, many business households scarcely maintain invoices, let alone electronic ones. They often engage in transactions without documenting prices, as seen in tourism businesses, among others. Additionally, some establishments engage in deceptive pricing practices, leaving tax authorities unable to effectively regulate them. This situation illustrates the lack of oversight in managing business households, which results in revenue losses for the state budget.
- That said, is tax evasion through dual pricing common among businesses that maintain invoices?
- In addition to businesses without invoices, some larger entities that do possess invoices engage in dual pricing to underreport their sales and pay lower taxes. For instance, when selling a motorcycle, the buyer may pay the correct price, but the invoice reflects a lower value to reduce the tax liability. This practice is not uncommon. In these cases, it is not solely the responsibility of the sellers; lax enforcement by state agencies plays a role in enabling this behavior.
Local authorities, including district, commune, and ward-level tax teams, market regulators, and trade inspectors, should be capable of monitoring and detecting such practices. Their failure to do so indicates a lax approach to oversight in private sectors, traditional markets, and business households, creating an opaque market, diminishing state budget revenues, and impacting the financial environment and the nation's reputation.
- The Government has issued Decree 123/2020/ND-CP, requiring all businesses and business households to adopt electronic invoices. Do you believe this measure can help bridge the presumptive tax gap?
- According to Government Decree 123 on electronic invoices, effective from July 1, 2022, all types of businesses must utilize electronic invoices. Nevertheless, to date, individual business households have shown limited progress in this regard. Many small convenience stores and larger businesses have yet to establish connections with electronic invoice systems.
Under current regulations, businesses must issue invoices to consumers for purchases exceeding VND 200,000. However, obtaining a receipt when dining at restaurants or eateries can be a challenging task. This is partly because many business households aim to evade declaring their revenue, and presumptive taxes facilitate this evasion. If they issue many invoices, their tax liability would exceed the flat tax amount.
Consequently, they would be required to adjust their flat tax rates upwards, which is not in their best interest. This highlights the importance of fully implementing electronic invoices and phasing out presumptive taxes. The success of this transition relies significantly on the commitment and diligence of local authorities and tax agencies in enforcing Government Decree 123 on electronic invoices.
- What solutions do you propose, sir?
- For an extended period, most regions have paid limited attention to presumptive tax management and reform because it contributes less than 10% to the budget revenue structure, leading tax authorities to allocate minimal resources to the matter. Furthermore, presumptive taxes lack a close connection to actual business activities and lack a standardized formula. Consequently, local tax officials, in cahoots with business entities, exploit this gap to avoid paying their fair share to the state budget.
In my view, innovative methods for management, classification, grouping, and zoning are necessary. Presumptive taxes should apply only to small business households involved in activities such as selling water, breakfast foods, noodle soup, and seasonal businesses. In contrast, larger business households should not be subject to presumptive taxes and must adhere to an accounting system, maintain books and records, and issue electronic invoices, similar to regular businesses. For example, this approach should apply to businesses offering real estate and office rental services.
- Thank you very much.
