Tax evasion on the rise in Vietnam as e-commerce booms

tax evasion
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With COVID-19 sparking a surge in online shopping in Vietnam and an increase in the number of online sellers, authorities are discovering a growing challenge: tax evasion.

According to the Hanoi Tax Authority, e-commerce businesses and individuals paid around VND14 trillion ($618.2 million) in taxes in 2021, which is a small number compared to the scale of e-commerce in the country. The agency obtained data from over 32,800 online sellers in the city, of which only 3,388 reported sales of over VND100 million ($4,412) per year.

According to Nguyen Thi Lan Anh, director of the Tax Administration Department for Small and Medium Enterprises and Business Households and Individuals, there are around 14 big tech firms and eight e-commerce websites in Vietnam that have so far met tax obligations.

Individuals who conduct business online have several methods to hide their real income, according to Nguyen Minh Phong, an online seller, in an article by The Japan News. Nguyen said that sellers may request payments in cash, set up numerous accounts with various names to split earnings, or report lower revenue figures. Every year, their practice of tax evasion deprives the State of a significant amount of money.

Vietnam’s digital economy is estimated to have reached $21 billion in 2021, after a 53% year-on-year growth in e-commerce, according to a report by Google, Temasek, and Bain and Company.

In an earlier announcement, Masan Group CEO Danny Le said that they are aiming to capture a bigger slice of Vietnam’s e-commerce pie, which currently represents just 2% of the country’s retail market.

Late last year, it was revealed that Shopee and Lazada, the top online e-commerce platforms in the region, also dominated e-commerce in Vietnam. Tiki, a local platform, came in at third.

According to Le, Masan aspires to become the go-to firm for 80% of individuals’ basic demands, which necessitates them to interact with their physical and online contacts. A Masan unit purchased a 70% stake in Reddi, a start-up network operator of mobile virtual networks, in September.

By 2025, the Vietnamese government forecasts that online purchases will account for 10% of all retail sales in Vietnam and as much as 50% in the two main cities, Hanoi and Ho Chi Minh City. Today, the country is Southeast Asia’s third-largest e-commerce market, after Indonesia and Thailand.

In addition to online sellers, online content creators – including those active on YouTube – are also contributing to the tax evasion problem. There were about 15,000 money-making YouTube channels in Vietnam by the end of 2020, according to the Ministry of Information and Communications, with 350 having more than one million subscribers.

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