The State Bank of Vietnam has issued a formal request to credit institutions and foreign bank branches for cooperation and information sharing with tax administration organisations. Le Khanh Lam, tax partner at RSM, discussed with VIR’s Le Luu how banks and tax agencies can harmonise the fresh legislation, and how barriers can be overcome without compromising customers’ rights.
In your perspective, how can commercial banks execute this initiative?
|Le Khanh Lam, tax partner at RSM |
Although the requirement for credit institutions to provide customer information to tax authorities is new in Vietnam, it has long been a practice in countries that are in compliance with the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) of the Organisation for Economic Co-operation and Development.
Accordingly, Vietnamese credit institutions and foreign bank branches can take similar steps when complying with the FATCA and CRS, such as amending and supplementing procedures and forms for registering customer information according to regulations. For new customers, banks should notify fresh regulations, publicise responsibilities of the banks, and list requirements for customers according to regulations of the State Bank of Vietnam (SBV) in order to confirm the relevant commitments and collect information from clients.
Banks should also thoroughly comprehend the new regulatory information, and then transparently address customers’ concerns and inquiries.
What are the most challenging obstacles when providing information on taxpayers’ bank accounts and their transactions?
Data privacy concerns are particularly paramount for both banks, tax agencies and customers alike.
From our assessment, the ability to ensure information security may be the most difficult challenge. Taxpayers’ worries about data leaks and losing account access when banks comply with their obligations are understandable.
This is because banks themselves have provoked public outrage by disclosing customers’ information, bankers selling customer information, hackers infiltrating the banking system to steal data, and customers losing accounts, among other issues.
Thus, financial institutions should beef up the implementation of tighter security layers to protect their customers’ information to avoid dire consequences regarding data breaches.
How can banks secure customers’ privacy from external threats while still obligating the SBV’s request?
Information security issues will undoubtedly be the top concern of customers. Therefore, banks must evaluate and upgrade their own systems and infrastructure to ensure data security commitments to their customers.
As part of their operations, banks must also have a firm grasp of the rules, only provide taxpayers’ information when the proper tax authority requests it, and do so via the digital portal of the General Department of Taxation in accordance with the regulations prescribed method.
Simultaneously, when the tax authority requests information, banks should notify relevant customers.
What are your suggestions for banks and tax agencies alike to continuously contribute to tax obligations, while enhancing customer satisfaction?
Banks and tax authorities should both clearly define the subjects and customer criteria that may necessarily require the provision of information to avoid creating cumbersome and costly administrative procedures.
Further to that, for long-term stability, legislation via an official regulatory document issued for banks to consistently apply is required, with explicit specifications of the framework of complaint resolution and compensation for damages arising from the disclosure of customer information.
By Le Luu