Tax agency finds difficult to combat e-commerce transfer pricing

Legal limitations as well as loose and asynchronous coordination among authorized agencies have made it difficult to manage e-commerce and combat transfer pricing in Vietnam, said the General Department of Taxation at a conference in HCMC on December 1.

Advertisements on an online shopping website. Many office workers have been in the habit of hunting low cost goods on the internet (Illustrative photo)

Tax agencies have been able to manage businesses attending e-commerce not individuals.

Deputy Head of the department’s Reform and Modernization Division Nguyen Thi Hanh said that e-commerce has advantageous conditions to operate in Vietnam with strongly developed IT infrastructures, over 40 million internet users and 130 million mobile subscribers.

E-commerce has attracted the attendance of many businesses under different types comprising online games, goods trading and advertisement. Online goods purchase has become the habit of many citizens while businesses have sped up online trading to reduce costs.

Still the quick development of digital technology in accordance with e-commerce has posed many challenges to management works.

E-commerce via internet has raised difficulties in determining prices and impose taxes. It neither requires much goods stockpiling nor have time and premise limitations with 24/7 cross border transactions.

Goods owners can trade under the state of anonymity and delete transaction information to prevent tax agencies from inspecting their activities.

Director of Financial Training Institute Hoang Tran Hau said that transfer pricing combat was not easy even in developed nations like Britain, the US, Japan and South Korea, where have tight legal and modern information systems, abundant database and good agency coordination.

In Vietnam, tax agencies have met with difficulties in determining e-commerce revenues and costs of businesses and individuals.

So far, the General Department of Taxation and tax agencies have applied Circular 66 issued on April 22, 2010 with detailed regulations on transfer pricing fighting. Some fraud cases have been spotted and inspected. Vietnam has also signed agreements against double taxation.

In addition, the General Taxation Department has established a division in charge of transfer pricing by businesses. Tax officials have been supplied and trained with basic knowledge and skills to combat the issue in e-commerce activities.

However authorized agencies should improve the legal system and better coordinate together to prevent e-commerce attendeees from taking advantage of loopholes to dodge the law and evade taxes.

The Ministry of Finance is now working with authorized agencies to study and issue a slew of legal documents to fight tax fraud and evasion via e-commerce transfer pricing. They will also speed up building policies to suit the reality of the activity and better management to prevent budget losses.

By Minh Xuan – Translated by Hai Mien

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