HANOI: Tax evasions are expected to rise in Vietnam as state policies have not been keeping up with the realities on the ground.
According to a report by Vietnam Institute for Economic and Policy Research (VEPR) and Oxfam International, tens of thousands of businesses have been detected violating enterprise income tax rules and escaped paying taxes worth up to trillions of dong per year between 2010 and 2018.
Vietnam News reported that tax violations had not only been occurring among multinational corporations but also in state-owned enterprises and domestic private enterprises.
It added that this happened not only in large enterprises but also in small- and medium-sized enterprises.
VEPR said although Vietnam had tried to consolidate the legal framework for tax administration, laws were still inadequate, inconsistent and had not kept pace with the reality of rapid and complex developments.
In the period, revenue loss in both value and proportion of corporate income tax has been on an upward trend since 2014.
Tax evasion and avoidance caused a revenue loss estimated at between 15.6 trillion dong and 20.7 trillion dong each year, equivalent to between 7.5 and 9.9 per cent of corporate income tax revenue.
Professor Nguyen Hoang Oanh from the National Economics University said tax evasion was a common phenomenon in the country.
In Vietnam, multinational enterprises had the best opportunity to evade taxes as they set up many branches abroad, shifting profits in high tax rates places to low tax rates places, Oanh said.
VEPR senior adviser Nguyen Duc Thanh, said that in an effort to combat the problem, Vietnam was trying to cut its corporate income tax to compete with other countries in the region.
The reduction of corporate income tax might cause Vietnam to enter into competition with other countries, and there might be a race for tax incentives for businesses among Asean countries, Thanh said.