HCMC agencies powerless to stop tax evasion

Following an August Sai Gon Giai Phong report on tax evasion by many Ho Chi Minh City businesses, the city’s taxation and market management departments have verified numerous violations, but have appeared helpless to deal with the problem.  

Shoppers pay for goods at Phong Vu Computer Shop in District 1, HCMC (Photo: SGGP)

Many companies don’t issue value-added tax (VAT) invoices which record sales of goods and services worth over VND100,000 as required by law.
 
In this way, companies are able to hide the origins of their goods from the tax department.
 
Therefore, they also purchase their stock, much of which is illegally smuggled without tax invoices being issued.
 
While investigating seven firms, inspectors recently found five giants selling illegally imported goods including mobile phones, hard disk drives, computer memory chips, video camera batteries and electric appliances.
 
They included the Saigon Nguyen Kim Shopping Center, Thien Hoa Electric Center, De Nhat Phan Khang Company, Hoan Long Company and Manh Hung Company.
 
Some large enterprises have even been found operating without a business license or a permit to establish branches.
 
Despite penalties, most shops have continued to sell goods without VAT invoices.
 
Tax offices at a loss
 
Since the HCMC Taxation Department urged tax agencies to verify shops’ invoice issuance following the SGGP report in August, only a few agencies have done so with not many cases receiving fines.
 
It appears that current fines are too low to deter companies.
 
The fine of VND10 million (US$555) for selling goods without VAT invoices has not proved steep enough considering the average daily revenue of an electronics shop is VND6-7 billion. Meanwhile, the fine for operating a business without a license is only VND400,000.
 
An unnamed tax official said that fining businesses, even millions of dong, is not the solution since they will most often pay the fee and continue to evade their taxes. Meanwhile, the Law on Enterprise Business does not include an article allowing for the withdrawal of an enterprise’s business license if it fails to issue invoices, the official said.
 
City police have been tasked with handling the violations, but tax agencies say the authorities have not communicated with them.
 
Another unnamed tax official said according to the Law on Tax Management, tax agencies must inform enterprises three days prior to an investigation of their business premises. This gives firms enough time to legalize their books.
 
Tax agencies also attributed their lax inspection to a lack of staff.
 
The Taxation Department’s director said his division is in need of over 7,000 employees but currently has only 4,000.
 
Dang Khac Phuc, head of the District 1 Tax Agency, said there are presently 6,000 companies operating in the district but his agency has only a few dozen staff. On average, there is only about one employee in charge of 180 enterprises, so tax officials barely have enough time to read tax reports, let alone verify them.
 
Nguyen Nga, head of the Tan Binh District Tax Agency, said 99 percent of enterprises in the district sell goods and services without VAT invoices and falsely report tax payments, but his office doesn’t have sufficient staff to prove it.
 
In the face of so many obstacles, the city’s tax agencies appear to be fighting a losing battle. 

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By staff reporters – Translated by Hoang Yen

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