Vietnam targets reduced tax time

Chairwoman of the Vietnam Tax Consultants Association Nguyen Thi Cuc sheds some light on how to reach this goal.

What are your thoughts on businesses having to spend up to 876 hours a year on their taxes?

Several years ago, it would take up to 1,050 hours per year to complete tax procedures. This going down to 876 hours is evidence of the tax sector’s major efforts to improve procedures.

But even with this reduction, Vietnam is faced with a falling business climate rating in the eyes of international organisations. Comparatively, time spent on taxes in Indonesia last year was 259 hours, for Thailand 264 hours, 193 hours in the Philippines, 133 hours in Malaysia, 96 hours in Brunei and 82 hours in Singapore. On average this comes to 171 hours a year. This was the basis for the Ministry of Finance’s goal in simplifying procedures, to fall in-line with other ASEAN members.

Is this a realistic goal?

It will be a very difficult task, but it is within reach. In fact, revised tax policies just in the last year have resulted in breakthroughs that help reduce the time firms spend on procedures.

Also the General Department of Taxation must do more than just enforcing tax laws, it needs to continue reviewing, appraising and improving the tax payment process, push up administrative reforms, and increase transparency to make it easier for both firms and people to complete the process.

Will those efforts be enough to reach this goal?

I don’t think so. Vietnam is currently home to 1.7 million family businesses, over 1 million personal income tax payers, and more than 400,000 small and medium-sized enterprises (SMEs). These people and scores of accountants at SMEs can hardly grasp the slew of new tax laws and ordinances and hundreds of guiding documents, so it takes a long time for them to work on tax procedures. This explains why the process in Vietnam takes five times as long as other ASEAN members.

To cut down on time, I think it would be most advantageous to develop a tax agent system. Accordingly, agents would handle tax procedures based on agreements with tax payers. Tax agents would have the responsibility to provide tax organisations with accurate documents and complete payments, as well as take lawful responsibility for their work.

Could you explain more about what would be expected from a tax agent?

There are currently 120 tax agents in Hanoi and Ho Chi Minh City. Each have around 28 staff members but on average have 215 contracts with tax paying entities, meaning each staff member can process the taxes of about 10 businesses.

Businesses that use this service could save time and also minimise mistakes in terms of declarations and payments as agents know the law and regulations thoroughly, including new developments.

In fact, in terms of personal income tax, it often took people an entire day to complete their tax forms, whereas an agent could complete an individual’s forms in around five minutes. If each tax agent processed 300-500 individuals’ taxes, the time spent on this would reduce greatly.