Vietnam Chamber of Commerce and Industry (VCCI) has recently made additional comments on the draft amending Decree 126 on taxation and invoices, repeating its disapproval of e-commerce platforms’ paying tax on behalf of vendors.

VCCI was concerned that the draft would leave e-commerce platforms no choice but to pay tax with their own money and later collect the tax from vendors. Unfortunately, tax re-collection is not an easy task given 86 per cent of online transactions are paid in cash, putting them at risk.

“When transactions are paid in cash, money is transferred from buyers to sellers via shippers, not via e-commerce platforms. In such cases, the platforms face great difficulties recollecting the tax as they do not have the authority to enforce tax payment,” VCCI explained.

VCCI also feared that the draft would add costs to e-commerce platforms as they have to incur new expenses related to tax re-collection.

A study on 107 e-commerce platforms conducted by VCCI between April and May shows that their ratio of costs to revenues would increase by 10.65 percentage points should the draft be put in place.

“Over 80 per cent of the platforms said they have been running at a loss and continue to operate unprofitably in the coming years. The draft, if enacted, would place additional burden on their finances,” VCCI said.

Notably, 70 per cent of the platforms think it would be almost impossible to pay tax on behalf of vendors, and 100 per cent are concerned that they might face difficulties calculating vendors’ revenues, resulting in tax underpayment and overpayment.

Under the draft, the notion of “representative” is defined as a mandatory (involuntary) and automatic (no document of authorisation required) responsibility. VCCI believed such definition is at odds with that under the Civil Code.

"The regulations that require e-commerce platforms to pay tax on behalf of vendors have no legal grounds to be valid and are inconsistent with other relevant legal documents," VCCI said.

VCCI also said the draft is unclear in that it does not define which vendors e-commerce platforms are required to pay tax on behalf of – all vendors or only those who earn over VND100 million per year.

"Under current legal documents, only individual vendors who make annual revenues of over VND100 million are eligible for taxation," VCCI stressed.

If that is also the case under the draft, the platforms would have to detect high-revenue vendors to hold them taxable. Unfortunately, detecting taxable vendors is a tough job as no criteria are available for determining which vendors go beyond the revenue limit.

Economic expert Dinh Trong Thinh underscored the taxation principle that organisations and individuals have to pay tax by themselves to invalidate the regulations.

He said e-commerce platforms are just intermediaries who connect online buyers and vendors, so it is irrational to hold them responsible for paying tax on behalf of vendors.

Accordingly, VCCI called for modifications to the draft, sparing e-commerce platforms the obligation of paying tax on behalf on vendors. Instead, they should be required to disclose vendors' information to the tax authorities.

The disclosure frequency is proposed to be yearly, instead of quarterly as stated in the draft. Lower frequency is believed to help ease the hard work of information disclosure.

VCCI also called on lawmakers to add a clear-cut definition of vendor revenues to the draft, which would be the sum of all revenues recorded on the vendor's invoices. — VNS