Firms clean on VAT reimbursements

No violations of value-added tax reimbursement were found last year, a huge achievement considering it was estimated that state budget losses from false reimbursements would reach $20.6 million, based on previous years’ averages.
The General Department of Taxation’s most recent report said the result was an encouraging achievement for the country’s tax sector.
Department head Nguyen Van Ninh said: “The police and tax officials made great joint efforts last year to curb fraudulence on VAT [value-added tax] reimbursement. I must say they have been very successful and done a great job.”
Ninh had good reason to cheer considering previous years. VAT violations in 2002 alone equalled losses of VND300 billion ($19.3 million) for the state budget.
According to the Ministry of Police, the official body supporting the tax office in fighting tax violations, from 1999 to 2002, hundreds of sophisticated tricks were used to evade the tax.
Bubble companies were established to trade invoices, sales documents were falsified and worst of all, false declarations of quantity and value of exports were made in order to receive tax reimbursements.
In 2002 alone, the police found 1,600 bubble companies established just to trade invoices and 130 other enterprises involved in false tax reimbursements.
“No cases related to fraudulence in tax reimbursement were uncovered in 2003 although here and there, there were still cases of bubble companies or false sales documents in the small scale,” Deputy Minister of Police Le The Tiem said.
Ninh said that besides improving the capability and skills of the police force and tax officials, some major changes in VAT laws which took effect last year could also be the reason behind the good results.
“The original law stipulated that enterprises can make out a document to apply for tax reimbursement even when they have not paid tax.
“This created loopholes for some enterprises to abuse the law,” Ninh said.
“The revised law only allows enterprises to ask for tax reimbursement when they have paid the tax.
“Moreover, reimbursement procedures must be processed through banks, which have an efficient control system to check the accuracy and legality of relevant documents,” he said.
The Ministry of Finance also revised regulations related to selling invoices to enterprises to clarify illegal usage.
Accordingly, enterprises can only buy invoices when they show that previous invoices have been used up and prove with regular papers the aims of the invoice use.
To prepare for a better year in 2004 in terms of fighting tax violations, Ninh has asked the tax department to further improve its use of computers in the management and control of tax collection and reimbursement.
“Violations of VAT reimbursement will be completely under control once computers are used in all aspects of the tax sector,” Ninh said.
In Vietnam there are about 80,000 enterprises subject to VAT, of which 2,500 are foreign-invested, 5,000 are state-owned and the rest non-state domestic.
From 1999 to 2002, the tax department received 28,199 sets of documents asking for tax reimbursement to a total value of $1 billion.