September 24, 2018 16:11

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Tax debt relief: difficult but still solves the problem

20:25 | 01/04/2018

VCN- Non-recoverable tax debt has been a difficult problem for the financial sector for many years due to legal obstacles. If the tax debt can not be relieved, delinquent payment and higher tax debt will cause budget imbalance. Therefore, the Ministry of Finance is collecting comments on the draft report to the Government on the resolution project of the National Assembly on the handling of debt write-offs, freezing tax debts, late payments and irrecoverable fines .

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The number of tax arrears in the annual report has increased because of the late payment of 0.03% per day, about 11% per year. Photo: Thuy Linh.

Debt increases due to late payment fines

Of the total VND 26,500 billion of tax debt that the Ministry of Finance proposed to relieve, the largest amount was in the business sector with VND 24,302 billion. These are cases where it is impossible to collect from the taxpayers due to actual dissolution, bankruptcy, termination of production and business activities before 1 January 2017, no longer able to remit the budget. Of which, about 10% of enterprises are insolvent, dissolved, bankrupt or terminated their business activities but failed to fulfill the prescribed order and procedures.

Proposals for tax debt relief due to force majeure or other objective obstacles included late payment of tax debts due to natural calamities, fires, unexpected accidents or inconveniences with a total of about VND 1,700 billion. Delayed payment to taxpayers who supply goods or services paid to State budget was VND 542,525 billion.

According to the Ministry of Finance, the amount of debt that can not be recovered is higher due to the fact that the tax debt recovery in practice is difficult due to legal regulations. For example, a tax debt of more than 10 years may be deleted only if the tax office has implemented all coercive measures. However, there have never been any cases of tax debt relief due to the failure to meet the "all coercive measures" condition for a number of reasons that are unforeseeable and difficult to implement in practice. In other cases, taxpayers died or lost their civil capacity, but no agency is responsible for certifying dead or missing individuals.

It is because of the fact that debts are suspended year after year. Since then, the number of tax arrears in the annual report has increased because of the late payment of 0.03% per day, about 11% per year.

Not afraid to create bad precedent

In the petition submitted to the National Assembly, voters in many provinces and cities have repeatedly proposed to remove tax debt. Minister of Finance Dinh Tien Dung thoroughly explained that in fact the amount could not be collected, mainly due to debts of dissolved or bankrupt enterprises. In a proposal sent directly to the Prime Minister Nguyen Xuan Phuc at the implementation of the tax year 2018, Minister Dinh Tien Dung asked the Government to remove the irrecoverable tax debt. The Prime Minister agreed with the proposal of the Ministry of Finance and the direction must be strictly implemented.

The removal of taxes, fines, and delayed payments seems to be a "loss" of the budget, but it is not. In fact, many businesses are bankrupt due to natural calamities, floods or business license revocation, so it is impossible to recover the tax debt.

The economic expert, Mr. Ngo Tri Long said that it was hard to solve the tax problem because the tax debt of VND 26,500 billion could not be collected. The current regulations should be suspended from year to year. It would be like a suspended sentence, even though it affects business and budget imbalance.

In addition, the elimination of late payment of tax for businesses with force majeure difficulties also helps businesses recover and develop production and business. Since then, enterprises have the ability to pay tax debts, and at the same time, create a prerequisite for increasing state budget revenues in the future. If you are afraid of creating a bad precedent, you will not be able to solve the debt without being able to recover it.

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It is argued that the tax arrears for irrecoverable debts due to objective reasons are in line with international practices. It is important to avoid the situation of the law-enforcement business to get rid of tax debt. Deletion of tax debts requires the responsible agencies to check. "The cases recommended for removal will have to be checked carefully. The guidelines are perfectly suited but the implementation process must be transparent and fair. It is impossible to take advantage of the loss of the State", Mr. Ngo Tri Long said.

By Thuy Linh/ Hoang Anh