Low-value e-commerce goods a target for VAT switch

National Assembly (NA) deputy Hoang Minh Hieu from the central province of Nghe An said last week at the current NA session that with the development of e-commerce, the volume of imported goods with a small value is increasing. Therefore, the total volume of imported goods in this form will continue to be considerable.

“If tax exemptions are enforced, it will not lead to collecting a fairly large amount of tax; not to mention that it may lead to the situation of breaking up order values in an attempt to avoid tax,” Hieu said.

Low-value e-commerce goods a target for VAT switch, Source: freepik.com

According to Metric’s e-commerce report for the first nine months of 2024, products under VND200,000 ($8.30) account for more than half of the total sales of the Vietnamese e-commerce market. Vietnamese people spend $1 billion shopping online every month.

Imported goods sent via express delivery that are valued at less than VND1 million ($41.6) are exempt from import tax and input VAT, according to current government regulations, noted by Decision No.78/2010/QD-TTg on the level of value of imports sent via the express delivery service which are exempt from duty and tax.

But that looks to be on the way out. Deputy Prime Minister, Minister of Finance Ho Duc Phoc said that the exemption of VAT on small-value goods is implemented by the government by the commitment to the Tokyo Convention. He acknowledged that many countries have abandoned this commitment: for example, Thailand has collected a 7 per cent tax on small-value goods. “The government will abolish Decision 78 and all imported goods of small value must pay tax,” he said.

NA deputy Hieu stated that the tax exemption for imported goods with small value also directly affects domestic manufacturers and retailers because imported goods will enjoy many great advantages. First of all, not being subject to tax will help imported goods to be cheaper than domestically produced goods. At the same time, as there is no need to calculate tax, customs procedures for these goods will also be faster and more competitive.

“In recent days, some foreign e-commerce platforms have been selling goods at very cheap and competitive prices. If there are no early solutions, it will greatly affect the domestic manufacturing industry,” he said.

The European Union exempted taxes on cross-border transactions worth less than €150 ($163). However, the regulation was abolished in 2021 to reduce tax losses from e-commerce and ensure fairness in the business sector. Countries in this region such as Thailand, Malaysia, and Indonesia have taken similar steps.

Previously, a National Assembly Standing Committee report stated that many opinions have been collected on VAT of imported goods of small value. “We are losing tax revenues due to a large amount of imported goods on e-commerce platforms,” the report stated.

According to the report, the government is currently drafting a decree on customs management of exported and imported goods traded via e-commerce. The committee proposed that the government urgently issue a decree and immediately terminate the validity of the current decision to ensure the consistency of the legal system.

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