The Hanoitimes - Some of the “strategies” businesses on Facebook are using to evade taxes include increasing transactions involving cash, creating various sales websites, changing locations, report false revenues, etc.
Pretend to be inactive to evade taxes
After a period collecting data, the Ho Chi Minh and Hanoi Tax Departments started to send out mails and messages asking owners of Facebook shops with revenue exceeding 100 million VND per year to register their businesses and declare taxes.
However, one month after tax agencies contacted Facebook account owners, shops with considerable incomes have changed their tactics to evade taxes.
Thirty two year old Ho Kim Trung from District 5, Ho Chi Minh City opened his business on Facebook and has sold watches, sunglasses and bags; the items brought from other countries. His facebook page is called hangxachtayxxx where he posted product pictures and prices Buyers just need to access his facebook page to see images, sizes, colors, origins, prices and other related information of the items.
Pic. Cash payment make it difficult for tax colletion for online shop
His Facebook page became wellknown among the online community and attracts a steady stream of customers, generating revenue of not less than 120 million VND per month.
As being targeted for tax payment, he then changed his business operation. “I don’t brag about my revenue anymore. I don’t neither publicize my prices online. Who truly want to buy my products will call my phone number posted on the page. I will ship the goods directly and take cash,” Trung said.
Not only Ho Kim Trung but Thu Ha residing in Go Vap District also said that two years ago, she created a clothing shop on Facebook and invested a lot of money in her online shop to attract more buyers. However, when one of Ha’s friends was invited to the Tax Department, she started to get anxious.
“I created the online shop as a side job to earn some extra money, so I can buy milk for my child. I’m an office worker with a stable salary and I pay income tax every month. I can’t afford to paying more taxes,” Ha says.
In order for the Tax Department to ignore her case, Ha deactivated her account and closed her business.
Seeing it not as a long term solution, she came up with a strategy to chat directly or interact with customers through viber, zalo, etc. instead of Facebook. She also created many other similar fanpages selling clothing. Customers can go to different pages and choose their favorite items. However, the buyers will only contact the number publicized.
“It is very tiring and also time-consuming to create various selling pages and interact with customers through multiple social media platforms such as zalo, viber, etc. However, tax agencies won’t be able to find which is the main fanpage and then they will not be able to find online shops with big revenues that have to declare taxes,” Ha said.
According to Do Vo Thang, the Director of the Athena Cyber Security Training Center, online businesses have various tactics to evade taxes such as creating many fanpages, increasing in-cash transactions and avoid publicizing prices online.
Currently, the Ho Chi Minh City Tax Department only made a list of Facebook shop owners and will start collect tax from them. As a result, many people declare their locations in other provinces instead of Ho Chi Minh city, and leave only the contact number.
Counter measures against tax evasion
Facing difficulties to collect tax from online shop owners, tax officers have implemented guidelines to take action against and punish those who deliberately evade paying tax.
Officers from Ho Chi Minh City Tax Department said that they know about the way Facebook shop owners try to cover up their activities. As such, tax officers are likely to play the role of customers to catch tax evading online shop owner in the act.
According to an officer from the General Department of Taxation, the authorities also discuss measures to cooperate with internet service providers and related agencies in stopping transactions against those who intend to not fulfil their tax oblications. The last resort to this problem would be to work with Facebook’s representative office in Vietnam to block Facebook pages.
Ho Chi Minh Tax Department has issued the plan no. 35 with an aim to increase efficiency in tax management for online business community, which would name and shame owners of Facebook shop that continue to intentionally evade their tax responsibilities.
According to an economic expert, Dr. Nguyen Tri Hieu, Facebook sellers who have the revenue exceeding 100 million VND per year will only have to pay value added tax of 10% and income tax of 0.5%.
Tax collection will be carried out when the Department has information about the online shop’s revenue. As payment in cash is still very common, it is difficult to collect tax based on the seller’s honesty, and in most cases, they will only pay a fraction of their revenue.
“With the current technology, it is very challenging to track online transactions. There is a high chance of tax under-collection in online business”, Dr. Hieu said.