December 11, 2019 08:21

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Difficulties in tax debt management

11:38 | 02/11/2019

VCN – The management of tax debt is still a difficult task for the Tax sector because it is not true that enforcement measures result in the collection of tax debts. Difficulties arise from many aspects, making debt management a struggle for tax officers.

difficulties in tax debt management Drastically recover tax debt in the last months of the year
difficulties in tax debt management Create a legal mechanism to handle irrecoverable tax debts
difficulties in tax debt management Suggestion to revoke business registration certificates of enterprises owing debts
difficulties in tax debt management
The General Department of Taxation has requested tax departments closely monitor the fluctuation of tax debts.

Drastic measures

Debt management has always been considered a key political task. At the beginning of the year, the tax sector has implemented synchronous measures to recover old debts and prevent new ones. Each tax department assigns targets of tax debt revenue to each department leader, tax team and tax officer. This is considered an important criteria for officials and employees.

In Hung Yen Tax Department, from the beginning of the year, the General Department of Taxation has assigned the target of tax debt revenue in 2019 for the unit as of December 31, 2019, of less than VND 876 billion. In particular, the recoverable tax debts do not exceed VND 293 billion, and at least 80 percent of recoverable tax debts as of December 31, 2018 must be collected. To accomplish this target, Hung Yen Tax Department has assigned targets of tax debt revenue to each unit and drastically directed debt management, collection and enforcement.

As of early October 2019, Hung Yen Tax Department has issued 429,870 notices of tax debts, fines and late payment interests to debtors; 1,950 enforcement decisions, of which 1,614 decisions on account deduction, 336 decisions to notify the invalidity of invoices; and disclose 4,236 enterprises who delay in tax debt repayment and do not comply with tax law.

In Quang Binh Tax Department, since the beginning of the year, this department has continuously taken coercive measures according to the law for units that owe tax for more than 90 days, delayed tax debt repayment and appropriated tax money. As of October, the department has issued 296 coercive decisions to recover outstanding tax debts, of which 239 decisions were on account deduction and 53 decisions to notify the invalidity of invoices and two decisions to revoke licenses. Quang Binh Tax Department has also worked with the provincial State Treasury unit to make deduction at source for the tax debts of units implementing capital construction funded by the state budget; coordinated with the Department of Natural Resources and Environment and the Department of Planning and Investment to collect tax debts through the granting and extension of mining rights, land rents, and investment projects and collected tax outstanding debts through tax refunds.

In addition, each month, after closing the tax books, the department will notify the list of taxpayers who have not implemented enforcement decisions to request tax branches to enforce them. At the same time, publicizing the list of enterprises that owe tax on the portal and mass media.

At Hanoi Tax Department, since the beginning of this year, this unit has disclosed 1,433 units of tax debt, land-related fees, fines and late payment interest with a total of VND 2,146 billion. Also, publicizing 507 units of tax debt, land-related fees, fines and late payment interest with a total of VND 4,265 billion. The public disclosure of tax debtors is a drastic measure by Hanoi Tax Department, which shows the determination of the department for enterprises delaying tax debt repayment. As a result, 1,168 enterprises and projects made payment totalling VND 418.7 billion to the State budget.

Difficulties in many aspects

There are many reasons for the tax debt of enterprises. First of all, the objective reason is due to difficulties in production and business. For example, one enterprise managed by the Nghe An Tax Department is Minh Khang Trading Co., Ltd. Currently, this company leads the debt list with a total debt of over VND 238.6 billion. Through investigation, almost all of Minh Khang's tax debts comes from land use debts, with more than VND 237 billion.

Currently, in Nghe An, Minh Khang Company is the investor of the project of Thanh An Saigon General Hospital. The total initial investment of the project is up to $10 million. This company is also known as the investor of the project "Complex of hotels, medical equipment and pharmaceuticals supermarkets and housing" in Nghi Phu Commune, Vinh City, Nghe An Province. However, up to now, projects in Nghe An province of Minh Khang Company are "stuck", leading to land use debts.

In addition to units with difficulties in production and business activities or problems in policies, there are still units that does not comply with budget obligations and delay tax debt repayment.

According to a company that used to owe taxes, the current late payment fine of the tax authority is 0.03% per day. This rate is a bit lower than bank interest lending rate. Thus, when the company faces financial difficulties, the company prefers to pay loans for banks first.

“If the company delays tax payment to the tax authority, the company will be fined for late payment, but if the company delays in paying loans to the bank, the company will meet more difficulties such as property enforcement, being listed on the bad debtors, making it difficult for future loans,” the company’s owner said.

At Hung Yen Tax Department, current bad debts at the department are still remarkable (VND 613 billion, accounting for 52.7 percent of the total debt). Meanwhile, the late payment interest is automatically calculated at 0.03 percent per day, resulting in increases in tax debt, making it difficult for debt management. Moreover, tax debts mainly focus on enterprises that owe large debts but face financial difficulties and are waiting for dissolution, bankruptcy and unable to repay debts such as: Quang Minh Vegetable Oil Joint Stock Company owed VND 266 billion as of 31 August 2019; Binh Minh Limestone Production Co., Ltd owed VND 123.1 billion; Hung Yen Lime Company Limited owed VND 20.3 billion.

Some enterprises still owed VND 443.4 billion of land use debt. Although the department has implemented measures to collect and enforce tax debts, enterprises still have not paid the taxes such as Hung Yen Export Food Joint Stock Company has a debt of VND 233.6 billion; Van Thuan Phat Co., Ltd has a debt of VND 69.9 billion; An Phu Investment and Development Limited Company has a debt of VND 88.3 billion and Phuc Hung Construction Investment Joint Stock Company has a debt of VND 27.6 billion.

With such objective and subjective reasons, up to now, debt management is still a problem for the whole tax sector. Human resources are restricted, debts are growing, compliant enterprises are in difficulty, non-compliant enterprises delay in payment, resulting in prolonged tax debt that means it is difficult for the tax administration agencies to control.

For tax debt not to exceed 5 percent of the total state budget revenue, the General Department of Taxation has requested the tax departments to closely monitor the fluctuation of tax debts, urged the collection of debts arising, avoiding prolonged debts, making it difficult for tax debt collection.

In addition, focusing on reviewing tax debtors, the amount, time and causes of debt to properly classify tax debts and tax debtors, thereby uniformly applying appropriate measures to collect tax debts such as: issuing notices of tax debts, fines and late payment interest; and decisions on tax debt enforcement.

At the same time, strengthening the dialogue with tax debtor enterprises to find causes and solutions to solve difficulties and problems and encourage enterprises to pay the tax debt to the state budget

By Thuy Linh/ Huyen Trang