Brian Jeffrey
Significant Tax Revenue Losses from Cross-Border E-Commerce in Vietnam
Between January and June 2024, Vietnam experienced a dramatic influx of low-value goods crossing its borders without incurring taxes, amounting to between $1.3 and $1.9 billion each month.
With daily processing of 4 to 5 million cross-border e-commerce orders, the potential tax revenue that is not collected is quite substantial. This issue diverges markedly from practices in other countries that have already curtailed tax exemptions for low-value items.
During a forum on September 23, organized by the Government’s Information Portal, Dr. Dinh Trong Thinh, former Head of the International Finance Department at the Academy of Finance, pointed out this significant revenue loss.
He reported a rapid expansion of Vietnam’s retail e-commerce market, which grew from $2.2 billion in 2013 to $20.5 billion in 2023, now constituting 8% of the nation’s total retail and service revenue.
“Every month, low-value goods worth between $1.3 and $1.9 billion cross our borders tax-free. The volume of daily orders underscores the seriousness of this tax gap,” Thinh emphasized based on the Ministry of Information and Communications’ data.
Several nations have already revoked tax exemptions for low-value imports. For instance, in 2021, the European Union abolished tax exemptions on items priced under €22, while the UK enforced similar measures for products under £135. Thailand enforces a consistent 7% tax on all imports, regardless of their value.
Contrarily, Vietnam retains outdated policies. A 2010 ruling, Decision 78, allows tax exemptions for small-value imports (under 1 million VND). Originally designed to streamline customs procedures, Dr. Thinh argues that such exemptions are now obsolete due to advancements in digital technology.
Responding to this issue, Nguyen Thi Lan Anh, Director of the Tax Management Department at the General Department of Taxation, announced that the Ministry of Finance has proposed amendments to the Law on Value-Added Tax to eliminate exemptions for low-value goods.
Moreover, new regulations are being considered requiring e-commerce platforms to manage tax declarations and payments for individual sellers. This initiative aims to lessen administrative workloads while enhancing tax collection efficiency.
International organizations like the World Bank and the OECD advocate for e-commerce platforms to take on tax obligations on behalf of their sellers.
The U.S. and China have already adopted similar regulations. In the U.S., numerous states mandate that online platforms handle tax payments for both domestic and international sellers. Meanwhile, China requires platforms to keep transaction records for up to three years for tax authority access when needed.
In Vietnam, the General Department of Taxation is actively partnering with various ministries to enhance e-commerce tax collection. In 2023, tax revenues from e-commerce activities reached 97 trillion VND, a rise from 83 trillion VND in 2022.
Efforts are underway to establish a comprehensive e-commerce database. The Ministry of Industry and Trade has begun sharing information on over 1,000 e-commerce platforms, with plans to expand this to include more than 50,000 e-commerce-related websites.
Furthermore, the Ministry of Information and Communications is aiding the initiative by providing data on foreign entities involved in cross-border advertising, telecommunications services, and domain registrations relevant to e-commerce.
