The Tax Man Cometh

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As Vietnam wrestles with the reduction of the fiscal deficit, there is a lot of focus from the tax authorities on how to collect more tax. With its large, internet connected population (45% of the population of 93 million) there has been a rapid increase in selling through online channels, and this is now becoming a target for the tax authorities.

As we all know, Vietnamese are very creative and industrious and much growth has come from small businesses selling products online through channels such as Facebook, Zalo and Instagram. The most common products are shoes, cosmetics, clothing and housewares, according to a survey conducted by Vietnam Economic Times.

Shoes accounted for 46% of the online sales according to the survey. However, the survey also showed that many shoppers are still wary of issues to do with product quality and overall credibility.

A recent Nielsen report showed that on average, each person in Vietnam spends US$ 160 per year on online shopping.

Notwithstanding, the bigger debate is whether this type of ecommerce should be taxed. Interestingly almost half of the respondents to the survey were in favour of taxation, however there is a need to have clear tax policies and regulations in place before taxation is applied.

In the opinion of the writer, and many of the people interviewed by VET there should be suitable policies, and any business whether part time or full time should be accountable for tax on their profits, or by way of personal income tax.

Other taxes being pondered are a 1% tax on M&A deals. The tax office has also started making hotels accountable for Foreign Contractors tax on bookings through foreign channels such as Expedia, Agoda and Booking.com.

The key issue is lack of clear guidelines and transparent application, not with the concept of taxing profitable business or individuals.

-Kenneth M Atkinson, Executive Chairman of Grant Thornton Vietnam

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