Handling tax arrears: Finding a "special cure"

(Baonghean) - By February 2014, the tax debt in the whole province was more than 886 billion VND, of which the debt at the Management Department Office was 460 billion VND, and at the tax management branches was 426 billion VND. Many branches have large tax debts such as Vinh, Nam Dan, Quynh Luu, Hoang Mai... If there is no strong solution, tax debt is expected to increase.

Tax debt increases

We went to Tien Luc Construction Joint Stock Company (Vinh City) - the unit that is "at the bottom" in tax arrears at Vinh Tax Department with 3.2 billion VND. The company's director - Mr. Le Trung Chinh explained: Of that debt, the principal debt is only 1.8 billion VND, however, because there is no money to pay tax, the fine has increased like that. In 2013, this company did not pay any tax, but in 2012 it paid 2.6 billion VND in tax. That shows that the company has high revenue. Explaining why in 2013 it did not pay tax, Mr. Le Trung Chinh said: The company's customers still owe over 20 billion VND, so the company does not have money to pay tax. In 2014, we will urge customers to collect debts to pay tax to the State.

Vinh Tax Department officials discuss with Tien Luc Company Ltd. officials about tax debt

Also in the Construction industry and in tax arrears, Vinh Hop Company Limited in Vinh City currently owes 631 million VND in taxes, including 130 million VND in fines. From 2013 to now, the company has not paid any tax, only 2 million VND in business license. Through analyzing the figures in the company's financial report, it shows that: This company has advanced 5 billion VND from projects, but has not yet paid all of the tax in that revenue. Mr. Tran Duy Doat - Director of the company explained that, although he is the company's director, he still has to ride a motorbike to Que Phong to do the project, there are still many difficulties, the investor owes a lot. However, according to an officer of Vinh Tax Department, the company has shown signs of delaying tax payment. Because value added tax is an indirect tax, the company only pays on behalf of customers, so if the company does not pay in the coming time, the Department will suspend the invoice.

Vinh City Military Veterans Clinic, one of the units with lingering tax debts.

An Chau Paper Manufacturing Company - a company that owes over 3 billion VND in taxes, sadly this debt has been going on since 2002. Coming to this company, the scene that hits you is an old factory that has not been upgraded or renovated, the Chinese production line has been invested in for a long time. The company's reported data shows that every year it loses billions. For example, in 2012, the company lost 1.3 billion VND, the reason being paying interest on bank loans of 1.362 billion VND, in addition to goods that are difficult to sell and have inventory. What is difficult to understand is why every year it loses money but the company continues to produce and has quite high sales (in 2012, the company achieved revenue of 8.88 billion VND). It is unknown when this company will be able to pay off all its tax debt. Recently, the company submitted a petition to the Vinh Tax Department to create the best conditions for the company to maintain its operations. Vinh Tax Department has also invited the company many times to commit to paying taxes and the company committed to paying tax debt of 50 million VND/month, but that amount is only equal to the fine and newly incurred tax. Therefore, the old debt is still "stuck in place".

As of February 28, 2014, the tax debt in Vinh City was 196,933 million VND, the tax debt increased rapidly every month. One of the reasons for the high debt in this department is that the management of principal debt in previous years was lax, many debts were long-standing but not handled, some businesses have lingering debts but have not had effective debt collection measures. For example, the Military Veterans General Clinic Medical Joint Stock Company (Vinh City) has owed 383 million VND in taxes for many years. The reason given by the doctors here is: The clinic is a joint venture with a company to form the Military Veterans General Clinic Medical Joint Stock Company, but up to now the company has not paid this tax. When we contacted this company, we were told that "The Director is away". Green Environment Waste Processing Technology Joint Stock Company in Dong Vinh - Vinh City currently owes 1.69 billion VND in taxes even though it is still processing waste, Huong Tra Joint Stock Company owes 1.17 billion VND in taxes, Dai Hue Cooperative owes 2.1 billion VND, Phuoc Thuy Private Enterprise owes 1.3 billion VND, Son Ha Private Enterprise owes 1.2 billion VND in taxes, 747 Construction and Trade Joint Stock Company owes 1.4 billion VND... According to the report of Vinh Tax Department, nearly 20 enterprises owe large tax debts of over 1 billion VND and hundreds of enterprises owe tax for over 90 days. Some enterprises change their address but do not notify the state agency.

In 2013, Vinh Tax Department implemented measures to urge tax collection and enforce tax debt, collecting 22.6% of the total recoverable debt as of December 31, 2013, which was 34 billion VND. Of which, by debt management measures, it was 23 billion VND, and by tax debt enforcement measures, it was 11 billion VND. However, it can be seen that tax debt is a burden for Vinh Tax Department. According to Mr. Hoang Pham Quang - Head of the Debt Management and Tax Debt Enforcement Team, the reason for the rapid increase in tax debt at Vinh Tax Department is: Due to changes in State policies such as reduction, extension, extension, quarterly declaration... so old debt is collected but new debt arises. The economic recession causes low efficiency in production and business enterprises, banks tighten lending so they cannot borrow capital to invest in expanding production, business and capital circulation. Enterprises operating in the construction sector have not received full investment capital from the State budget, leading to large and prolonged tax debts. In addition, right at the time of Lunar New Year, enterprises focus on paying salaries, bonuses to workers and serving the expenses during the holiday, so they do not have money to pay tax debts. Commercial banks are speeding up the recovery of loans, so the amount of cash on the market is scarce. Enterprises are forced to pay through their accounts, but banks always prioritize paying overdue loans before taxes.

Currently, in addition to the Vinh Tax Department, some tax departments also have large arrears such as Nam Dan with 16 billion VND, Hoang Mai with more than 20 billion VND, Quynh Luu with 18.7 billion VND, Thai Hoa Town with 17.9 billion VND. According to the Tax Department, the total tax arrears in the province as of February 28, 2013 were more than 886 billion VND, an increase of 77% compared to January 2014. One of the most obvious signs is that large enterprises also have large debts and are very difficult to collect. While small and medium enterprises are often urged to collect tax arrears, often receive invitations to work with tax authorities and implement debt enforcement measures more easily, large enterprises still do not have strong measures to "treat" the "tax arrears" disease. At the top of the list of enterprises with large tax debts are real estate businesses such as Vietnam - Laos Economic Cooperation and Investment Corporation Limited with a debt of 29 billion VND, Vinaconex 16 Construction Joint Stock Company with a debt of 13 billion VND, Construction Joint Stock Company No. 9.1 with a debt of 12 billion VND, Petroleum Construction Joint Stock Company with a debt of 14 billion VND, Minh Khang - Thanh An Minh Investment and Trading Company Branch with a debt of 4.9 billion VND, Hanoi Housing Development Investment Joint Stock Company with a debt of 10.7 billion VND... Next are construction businesses such as Phu Nguyen Hai with a debt of 2.1 billion VND, Bach Viet Company with a debt of 1.5 billion VND, Dredging and Seaway Construction Joint Stock Company II with a debt of 4.7 billion VND, Central Transport and Trade Construction Joint Stock Company with a debt of 4.9 billion VND...

Although the Tax Department has posted a list of businesses with large debts on the mass media, it seems that these businesses are "still calm as a cucumber". Some businesses sell land, rent out premises to make a profit, and appropriate workers' salaries and insurance but do not pay taxes. Some others, although customers have paid money to investors to buy land, still owe the State land use fee persistently for many years. In addition to guiding taxpayers to carry out procedures for tax extension, exemption, and reduction, the Tax Department has also promoted tax debt collection by many measures. Many of these measures have shown effectiveness, such as inviting businesses to work; fines for late payment, issues decisions to enforce tax debt collection by means of withdrawing money from taxpayers' deposit accounts, seizing assets, collecting debt through third parties, notifying invoices that are no longer valid, etc. The Department has also coordinated with a number of functional agencies to investigate tax arrears and prosecute a number of units. However, many businesses with large debts have not been able to pay. Some businesses, when tax officers come, show no cooperation and are "absent" continuously.

Limitations in debt management

In the work of tax debt collection and debt management, the leaders of tax branches said: The work of collecting, verifying and checking information to determine the honesty and legality of taxpayers' assets to apply enforcement measures still faces many difficulties. The work of collecting, verifying and checking information through the steps to implement an enforcement measure takes a lot of effort, time and cost. Especially when there is a change in the Law on Tax Administration applied from July 1, 2013. The work of coordinating with organizations and banks to provide account information when there is a decision on enforcement is still slow, most of the assets are mortgaged at the bank, so when the seizure is completed, it is difficult to sell the seized assets to collect money to pay into the budget. For example, currently Construction Company 757 is located at 161/01 Truong Chinh Street, Le Loi Ward, City. Vinh (MST 290057231) was forced by Vinh Tax Department to pay tax debt, but selling assets to recover debt is very difficult and requires many procedures.

When a part of the new debt is collected, the old debt arises, causing the tax debt to increase. The regulation allowing some businesses to declare taxes every 3 months also causes the debt to increase because at the beginning of the new quarter, the business does not pay taxes, causing the new debt to increase. The coordination in debt collection between departments is not smooth, especially between the tax inspection teams and the debt management and tax debt enforcement teams.

Another reason for the rapid increase in tax debt is that the VAT extension in 2013 is due but many units still do not pay; many construction units have difficulty with capital and request for extension but the documents are not complete according to the regulations so they are not resolved. At the Vinh Tax Department, debts lasting more than 5 years, 10 years, some enterprises request "debt cancellation" but the documents are lost, still incomplete and do not have enough legal basis for the proposal to cancel the debt, debt suspension has not been processed.

Debt collection is a difficult job. Every year, debt collection targets are assigned to each officer and each tax team, but the debt collection targets have not been linked to the emulation and reward criteria as well as monthly and quarterly salary evaluation. Mr. Tran Dinh Thanh - Deputy Head of Nam Dan Tax Department said: Nam Dan's tax debt is currently 16 billion VND. The current limitation in tax debt collection can be said to be the low coordination between the tax authority and local departments, branches and sectors, and the tax teams have not taken drastic action. In the coming time, Nam Dan Tax Department is advising the district to establish a Steering Committee for debt collection and anti-tax loss, and continue to classify debts, establish inspection teams, urge debt collection, and enforce debt collection.

The quality of debt management, debt amount, and debt age is lacking in the attention of tax teams, leading to a number of debts lacking supervision and monitoring. Some measures have been implemented by the branches but when not implemented, such as announcing to the locality, using loudspeakers where the enterprise is headquartered. Bad debt is increasing too quickly, still secret and difficult to handle, especially enterprises that stop, suspend, or abandon business not following the Enterprise Law and still have large debts with invoices.

High debt is also due to the fact that some departments and tax branches have not thoroughly implemented debt management and tax debt enforcement measures. Quy Chau, Yen Thanh, Anh Son, and Con Cuong branches have implemented very few enforcement measures against subjects that need enforcement.

Tax debt collection will not be effective without the participation of local authorities and related departments. Reality shows that in localities, districts and towns where coordination is close and drastic, the tax debt is not high, on the contrary, in places where there is a lack of participation of authorities and departments; in addition, the leaders of the branches are not determined, not concerned, and do not promote the measures assigned by the Department, so the debt increases.

Although there is a view that many businesses are currently facing difficulties, their assets are mortgaged to banks, and they owe salaries to their employees, so they cannot pay taxes. However, it can be seen that if they have a firm grasp of information, a firm grasp of revenue sources, and increased inspections at businesses, they can still collect more than the newly generated taxes. It is a fact that many businesses have not been inspected or audited for 3 years. In addition, to overcome the above shortcomings, the Tax sector must have strong sanctions for debt collection to progress.

Article and photos:Chau Lan