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Remission of irrecoverable tax debts: Reducing costs and human resource for debt management

09:58 | 10/06/2019

VCN - As irrecoverable tax debts are causing difficulties in management and unbalancing the budget, the remission of tax debts has been stipulated in the draft Law on Tax Administration (revised) by specific provisions, especially the authority of debt remission

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Tax debt is still a big challenge for the tax sector as irrecoverable debts accumulate over months and years. Photo: Thuy Linh.

Waste of costs and human resource for the management

According to the latest report of the General Department of Taxation, as of May, the total tax debt amount was more than VND 84,600 billion. In particular, tax debts overdue for up to 90 days and tax debts overdue for more than 90 days were VND 46,400 billion. This amount accounted for 54.9% of the total tax debt amount, up 20% compared to December 31, 2018. Specifically, taxes and fees were VND 19,890 billion (accounting for 23.5% of the total tax debt); land-related debts were VND 10,184 billion (accounting for 12% of the total tax debt amount); fines for administrative violations and late tax payment were VND 16,417 billion (accounting for 19.4% of the total tax debt amount). Notably, as of May, irrecoverable tax debts (taxpayers who are dead, missing, incapable of civil acts, related to criminal responsibility, have dissolved themselves, have gone bankrupt, or have stopped operation at the registered business address) were VND 38,137 billion, accounting for 45.1% of total tax debts.

Tax debt is still a big challenge for the tax sector as irrecoverable tax debts still accumulate over the months and years, wasting money in management and unbalancing State revenue. Therefore, the drafting agency has included separate regulations on debt freezing, remission of tax debts, late payment interests and fines in the draft Law on tax administration (revised).

On the draft Law on Tax Administration (revised), manager of Dong Da Tax Branch Le Quang Hung said the regulation on freezing tax debts, late payment interests and fines is required and suitable. Hung gave an example, the total irrecoverable debt at Dong Da Tax Branch as of April 30, 2019 was VND 673.8 billion of 17,591 businesses and business individuals, accounting for 54% compared to total debt of the Branch.

"These are irrecoverable debts because they existed since tax sector was established and belonged to those who are dead, or by law considered as dead, mission, incapable of civil act; waiting for dissolution, incapable of payment or have business registration certificates revoked by the registration agency,” said Hung.

It is worth mentioning that although these debts cannot be recovered, according to the current Law on Tax Administration, the Branch still has to monitor, manage and charge late payment (about VND 6 billion of late payment interests per month), leading to a situation where the debts required for management are very big while they are only virtual debts. Therefore, irrecoverable tax debts have imposed great pressure on costs and human resource. Thus, the addition of the provisions on debt freezing in this draft Law will reduce virtual debts and cutmanagement and human resource costs.

A Council for reviewing tax debt remissionshall be not established

The draft Law on Tax Administration (revised) has a separate chapter on debt freezing, remission of tax debts, late payment interests and fines, which specifies subjects and cases of debt freezing and debt remission, particularly for the inspection and supervision of the debt remission.

It was suggested to establish a Council to consult, review and advise the Chairman of the provincial People's Committee and the Ministry of Finance, General Directors of General Department of Taxation and Customs. The Standing Committee of the National Assembly said that the tax debt remission is under personal responsibility under the decentralised authority and under the functions and tasks of the competent State agency. On the other hand, the establishment of this Council will be difficult to blame organisations or individuals in deciding debt remission and increase administrative procedures. Therefore, the Standing Committee of the National Assembly has proposed not supplementing the provision on the establishment of the Council of tax debt remission in the draft Law.

Commenting on this issue, Associate Prof. Dr. Le Xuan Truong, Dean of the Tax and Customs Faculty at the Academy of Finance, said the draft Law on Tax Administration clearly stipulated specific cases subject to tax debt remission and authority for tax debt remission. This means that to clear the tax debt, the person who has the authority to write off the debt must fully consider and decide tax debt remission and be responsible for this decision. To serve competent persons (the Minister of Finance, the Chairman of the provincial People's Committee, the General Directors of the General Department of Taxation and Customs) to make decisions on debt remission, there is an assisting agency in charge of synthesis and explanation. Thus, debt remission is implemented in the right manner and in accordance with the law.

"The establishment of the Council will create unnecessary administrative procedures and waste time and effort, thus raising management costs and delaying the settlement of administrative procedures. Therefore, it will be difficult to clearly define personal responsibility for errors in the decision on debt remission,” said Truong.

Regarding tax debt remission, the previous draft Law on Tax Administration stipulated that authority to write off debts belonged to the Provincial People’s Committee, Chairman of Provincial People's Committee, General Directors of the General Department of Taxation and Customs, Minister of Finance and the Prime Minister. However, this regulation was not yet objective. Therefore, in the latest Draft, there is a regulation that tax debt remission at localities belongs to the Chairman of the Provincial People's Committee. Particularly, the regulation that the authority to write off the tax debts belongs to the General Director of Taxation, is still not objective, because the tax sector is a vertical sector so it should be reviewed.

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In terms of conditions for tax debt remission, the draft provides four terms but in general, there are two sections: the first section is for enterprises and cooperatives; the other is individual business households. However, the debt write-offs of VND 5 billion, VND 10 billion, and VND 15 billion are concentrated in individual business households. For businesses and cooperatives, the authority to clear debt rests with Chairman of provincial president, General Directors of Taxation and Customs, the Minister and the Prime Minister.

The draft also only stipulates that the Chairman of the Provincial People's Committee has the right to decide to write off the debt after an enterprise is announced as bankrupt. If under this section, the chairman is entitled to write off debts for bankrupted enterprises, but the debt of VND 5 to 10 billion is not concentred on business households but on enterprises and cooperatives. For business households, debts are deleted after 10 years but time for debt remission for enterprises and cooperatives is not stipulated. These issues need to be clarified.

(National Assembly Deputy Duong Minh Tuan (Ba Ria - Vung Tau) spoke at the National Assembly session on discussion and report on the reception and revision of the Law on Tax Administration (revised) on May 24).

By Thuy Linh/ Huyen Trang