According to Richard Leech, Board member of British Business Group Vietnam (BBGV), there are issues with inspections and audits by the tax and customs departments.
BBGV recommended the Government to consider establishing an independent body to review appeals from tax payers where there are major differences in opinions between the tax and customs officers and the taxpayers.
As mentioned by Mark Gillin, Head of Tax & Customs of Working Group, Vietnam’s tax audits are not inspections, they are reassessments.
Instead of focusing on verification, tax officers focus on adjusting an enterprise’s tax base by disallowing deductions, changing pricing, often based on differing interpretations, or honest mistakes due to misunderstanding or lack of awareness of the laws.
The tax officers’ assessments are often highly subjective and sometimes outright wrong. Instead of acting as “inspectors”, tax officers assume the roles of an untrained tax lawyer.
“Vietnam has made improvements in customs clearance and efficiency. However, very frequent-and largely unnecessary-post-import audits are creating burdens for companies," said Michael Kelly, Chairman of American Chamber of Commerce (AmCham).
"One company had over ten audits in a two month period even though there had been little reason for customs to consider the company a high risk imported,” he added.
AmCham encouraged Customs to adopt a more focused approach to target reviews of high-risk importers, rather than legitimate traders. This includes providing clearer differentiation in customs clearance process, customs inspections, price reviews and audits.
Moreover, local tax authorities often set collection targets for each enterprise during the audit process. Even if the officer knows no tax is due, tax officers will continue looking for offenses, effectively harassing until the quota is paid, based on Mark Gillin's opinion.
The audit drains the enterprise of precious time and creates the opportunity for leakage where tax officer keeps a portion to himself. All at the expense of, in most cases, are charged to companies who are law abiding and acting in good faith.
According to the World Bank's Doing Business Report recently released, the time to comply with tax filing requirements in Vietnam is 498 hours, nearly three times that of Cambodia, 2 ½ times the average for Asia and countries like China and Malaysia and 7.75 times that of Singapore and 6.8 times that of Hong Kong.
If we could cut that in half (to China’s level), that would leave 31 days to spend for planning, innovating or selling.
No other government policy initiative would have a larger more immediate or more cost effective impact on productivity than a commitment to cutting the time for tax compliance in half within two years.
What needs particular attention now is risk and uncertainty in the tax system which is perhaps an even larger problem for Vietnam based enterprises.