From January to June 2024, an astonishing $1.3 to $1.9 billion worth of low-value goods crossed Vietnam’s borders monthly without being taxed.

With 4 to 5 million cross-border e-commerce orders processed daily, the missed tax revenue is enormous. This situation stands in stark contrast to international standards, as many countries have already moved to close tax exemptions on low-value goods.

At a forum organized by the Government’s Information Portal on September 23, Dr. Dinh Trong Thinh, former Head of the International Finance Department at the Academy of Finance, highlighted this substantial loss in tax revenue.

He noted that Vietnam’s retail e-commerce market has grown rapidly from $2.2 billion in 2013 to $20.5 billion in 2023, making up 8% of the country's total retail and service revenue.

“Every month, between $1.3 to $1.9 billion worth of goods crosses the border without being taxed. With millions of daily orders, this tax loophole represents a significant revenue loss,” Thinh emphasized, citing data from the Ministry of Information and Communications.

Many countries have already eliminated tax exemptions on low-value imports. For example, the European Union scrapped tax exemptions for goods under €22 in 2021, and the UK removed its tax exemption for items under £135. Similarly, Thailand enforces a flat 7% tax on all goods entering or leaving the country, regardless of value.

Vietnam, however, continues to maintain outdated policies. Decision 78 from 2010 exempts small-value imports (under 1 million VND) from taxes, a measure initially introduced to expedite customs processing. But with the advent of digital solutions, Thịnh argues that such exemptions are no longer necessary.

In response, Nguyen Thi Lan Anh, Director of the Tax Management Department for Small and Medium Enterprises and Individual Businesses at the General Department of Taxation, revealed that the Ministry of Finance has submitted a proposal to the government to amend the Law on Value-Added Tax. This includes scrapping tax exemptions for low-value goods.

Additionally, Anh noted that new tax management regulations for e-commerce platforms are being proposed, which would require online platforms to declare and pay taxes on behalf of individual sellers. This would reduce the administrative burden and ensure more effective tax collection.

Many international organizations, including the World Bank and the OECD, recommend that e-commerce platforms take responsibility for declaring and paying taxes on behalf of their sellers.

Countries like the U.S. and China have already implemented such measures. In the U.S., several states require online platforms to handle tax payments for both domestic and foreign sellers. China also mandates that platforms retain transaction data for up to three years and provide it to tax authorities upon request.

In Vietnam, the General Department of Taxation is actively collaborating with various ministries to improve e-commerce tax collection. In 2023, tax revenue from e-commerce activities surged to 97 trillion VND, compared to 83 trillion VND in 2022.

Efforts are being made to build a shared database on e-commerce. The Ministry of Industry and Trade has already shared data on more than 1,000 e-commerce platforms and is working toward expanding this to over 50,000 website owners involved in e-commerce.

The Ministry of Information and Communications is also playing a role, providing data on foreign entities engaging in cross-border advertising, as well as telecommunications companies and domain registrations related to e-commerce.

Binh Minh