As published on: asia.nikkei.com, Tuesday 25 July, 2023.
Vietnam is preparing to deploy artificial intelligence to spot tax evasion as part of a more tech-savvy approach to enforcement that is already bearing fruit for the communist nation.
Facebook, Microsoft, Lazada and other technology companies are paying more taxes, authorities said, thanks in part to a recently introduced electronic filing system.
Foreign companies, dominated by U.S. platforms from Netflix to YouTube owner Google, paid 3.9 trillion dong ($165 million) in taxes in the first six months of 2023, the tax agency recently revealed. That is up from 3.4 trillion dong in the roughly eight months of 2022 after a tax portal for overseas service providers came online. Other app makers like TikTok, Apple and Shopee also have been a priority for the tax office.
"The increasing tax collection from tech firms, especially cross-border firms, along with the adoption of AI technology for tax enforcement, signifies a shift toward a more rigorous and tech-savvy approach to tax compliance in Vietnam," GV Lawyers partner Dinh Quang Thuan told Nikkei Asia.
The one-party state, a top market for Facebook and TikTok, has stepped up scrutiny as part of both its tightened grip on Big Tech and its participation in global deals to combat tax avoidance.
Levies in the e-commerce sector totaled 716 billion dong in 2022, more than double the year prior, though they have slowed in 2023, the General Department of Taxation said on Friday.
As the department pushes taxpayers to go digital, including with electronic billing, it is also digitizing itself.
Officials say they will use AI software, for example, to flag firms that issue invoices too often, for unusually high amounts or in other ways indicating attempts to slash taxable revenue.
"Currently, many companies are facing investigations because of the suspicion of having bought invoices for services they never received," Wolfram Gruenkorn, managing partner at WTS Tax Vietnam, told Nikkei. "Sophisticated IT systems, including AI, will be used to identify foreign service providers evading the obligations to pay taxes," reducing the "influence of the local tax officer significantly."
In December the Finance Ministry, which oversees the tax office, endorsed AI for such risk management, and also said it was preparing for "multilateral agreements on the right to tax income from the digital economy."
Hanoi has signed on to a 139-government deal to set a 15% global minimum tax on companies starting in 2024. It was brokered by the Organisation for Economic Co-operation and Development for what it called "challenges arising from digitalization and globalization of the economy." Vietnam's biggest foreign investors have pushed it to give them $200 million a year to make up for the higher duties, Reuters reported.
The Southeast Asian country has introduced more controls over internet companies in recent years, ranging from tax registration to takedown orders. It has ordered social media giants to block unflattering content and arrested users who post such content, according to Human Rights Watch. Vietnam says it enshrines civil liberties in the constitution while fighting misinformation from biased sources.
Businesses outside Vietnam have registered via the tax portal, in part to avoid a proposed system whereby banks would monitor their transactions and remit taxes on their behalf. Last week the tax agency said 57 foreign firms had registered, compared with 42 by the end of 2022.