Google faces tax penalties in Indonesia - does it pay tax in
Vietnam?
More countries want to collect taxes from
multinational technology groups like Google and Facebook, but the problem
they face is how to do it.
The global and local media has reported that the
Indonesian government decided to collect tax arrears for the past 5 years
from Google, estimated at over $400 million for 2015 alone. Indonesia is the
first Southeast Asian nation that will collect tax arrears from Google.
Earlier this year, Google's head office in Paris was
inspected by the local government, with the request of paying $1.76 billion
in tax arrears.
In 2013, the UK accused Google of tax evasion.
In recent years, the question whether Google and
Facebook has dodged or evaded taxes and how to collect taxes from these
groups has been repeatedly raised.
In Vietnam, advertising on Google and Facebook is done
via two methods: through agents and online transactions.
For the first method, only a few firms have registered
and paid taxes for the services.
For the second one, there is no provision to adjust and
it is difficult to determine income.
Under Decree 72 on internet service management dated
September 1, 2013, all the companies which provide cross-border services must
comply with Vietnamese laws.
This means that Facebook and Google, which have revenue
in Vietnam, must fulfill their tax duties in Vietnam.
Under the current laws, their activities of providing
services must be covered by the Ministry of Finance’s Circular 134 on foreign
contractor tax (FCT).
The circular stipulates that FCT is required if foreign
individuals and institutions provide advertising and marketing services to
Vietnamese individuals and institutions and the services are made overseas.
To declare and pay FCT, businesses have to set up
representative offices or branches in Vietnam and must use the Vietnamese
accounting system.
However, both Facebook and Google do not have branches
in Vietnam, which means that they do not follow Vietnam’s accounting
standards.
Facebook only has a media representative in Vietnam,
but it has a representative office in Vietnam. Meanwhile, Google does not
have any legal entity, branch or representative, but it has staff working for
Google in Vietnam.
As such, Vietnam not only cannot collect corporate
income tax from the companies, but also cannot control the personal income
tax payment. The workers of the companies are paid 2-3 times as much as the
workers of other companies, but they don’t have to pay personal income tax to
Vietnam.
Under Decree 72, the companies which provide
cross-border services don’t have to set up representative offices in Vietnam.
However, analysts commented that the regulation has ‘lent a hand’ to the
companies to evade tax.
Meanwhile, a lawyer said that there is no clear
definition about the ‘services provided and consumed outside Vietnam’, or the
‘ad services made overseas’. As a result, it is difficult to apply the FCT to
the companies providing cross-border services.
As a result, he said, Vietnam loses a huge amount of
money from failing to collect tax from the companies which earn hundreds of
millions of dollars from the services provided to Vietnam.
According to statistics, total online advertising
revenue of the Vietnamese market in 2014 was about $216 million and $329
million in 2015. Of which, revenue of Google and Facebook skyrocketed from
$65 million and $80 million in 2014 to $100 million and $140 million in 2015,
respectively.
If Vietnam can collect taxes fully, from value-added
tax to corporate income or contractor tax, the tax revenue from these groups
would be up to hundreds of million USD.
However, apart from a modest amount of "contractor
tax", Vietnam has not collected anything from these giants.
Compiled by Thu Nga, VNN
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Thứ Hai, 3 tháng 10, 2016
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