Tax arrears and tax evasion, which both cause losses to the State budget, are challenges faced by Da Nang.  However, effective measures to reduce tax collection losses are proving insufficent.

In the first half of the year, the Hai Chau District Taxation Department imposed fines totalling around 1.5 billion VND on 19 local businesses for their illegal use of value-added tax (VAT) invoices.  In addition, another 54 businesses suspected of buying and selling VAT invoices illegally were required to give explanations for their violations to local relevant agencies.

Workers at a local textiles and garments company

Mr Nguyen Kha Duong, Deputy Head of the Department’s Inspection team No 1, said that in addition to the illegal sale and purchase of VAT invoices, many local businesses colluded with other businesses nationwide to evade tax.  Therefore, local relevant agencies find it very hard to conduct their investigations of violators. 

Senior Lt Col Nguyen Manh Son, Deputy Head of the Economic Crime Investigation Division of the city’s Police Department, raised his concerns about the sophistication and complexity of tax arrears and evasion activities.  He remarked that his division has prosecuted dozens of cases relating to VAT invoices, which were losing dozens of billions of VND to the State budget.

Mr Son added that there seems to be an increase in the demand from local residents for illegally bought VAT invoices to increase the amount of tax withheld and reduce their tax payments.  In addition, there are numerous fundamental shortcomings in the national taxation laws.

Most notably, a company can avoid taxes by closing down in order not to pay their tax debts. 

According to a spokesperson for the Hai Chau District Taxation Department, last year a total of 73 local companies gave up their business activities.  In contrast, the figure was 38 in just the 2^nd quarter of this year.  As of late June, tax debts in the district had hit 213 billion VND, of which 98 billion VND was bad debts.

In the Lien Chieu Chau District Taxation Department, many enterprises which owe up to 7 billion VND have closed down.  This has caused difficulties for local relevant agencies to collect the debts and fulfil the district’s targets.