An additional VND 3,841 billion identified as payable to the state budget

SAV confirmed final state budget revenue for 2022 at VND 1,820,310 billion, equivalent to 128.8% of the approved estimate (exceeding it by VND 406,902 billion), and up 14.3% from actual revenue in 2021 (VND 1,820,310 billion/VND 1,591,411 billion).

Within total state budget revenue for 2022, domestic revenue exceeded the approved estimate by 22.9%, with several revenue categories significantly exceeding their estimates: revenue from state-owned enterprises by 13.3%, revenue from foreign-invested enterprises by 18.2%, revenue from the non-state economic sector by 21.7%, land use levy revenue by 54.4% compared with the centrally assigned estimate, and dividend and after-tax profit revenue by 8.2%.

Revenue from import and export activities exceeded the approved estimate by 24%; crude oil revenue exceeded the approved estimate by 177.1%. In addition to oil prices rising 74.5% above the level at the time the estimate was prepared (an increase of USD 44.7 per barrel), PVN had projected production below achievable levels, resulting in actual production exceeding the approved estimate by 24%.

SAV also found that underrecording and underreporting revenue and incorrectly determining expenses, resulting in understated taxes, fees, charges and other amounts payable, continued at audited entities. SAV identified an additional VND 3,841 billion payable to the state budget.

Regarding tax arrears management, SAV reported that total tax arrears managed by tax authorities (excluding crude oil arrears and arrears outside the tax administration system) stood at VND 158,914.7 billion as of December 31, 2022, up 36% from 2021 (VND 158,914.7 billion/VND 116,961.7 billion), an absolute increase of VND 41,952.9 billion.

The audit results showed that tax arrears as of December 31, 2022, amounted to 10.97% of domestic revenue (excluding crude oil), equivalent to VND 158,914.7 billion/VND 1,447,915 billion, up from 9.2% in 2021 (VND 116,961.7 billion/VND 1,268,644 billion).

Of the 59 tax departments audited, 22 understated total tax arrears by VND 7,546.3 billion; in 13 of 63 localities, discrepancies totaling VND 2,768.6 billion remained between tax arrears reports as of December 31, 2022, printed from the TMS application and hard-copy reports submitted by tax departments. Some localities failed to meet the arrears collection targets assigned by the General Department of Taxation.

In many localities, some tax authorities did not fully or promptly apply tax arrears enforcement measures to certain taxpayers and classified arrears contrary to regulations.

According to the General Department of Taxation, estimated total tax arrears as of May 31, 2024, stood at VND 199,964 billion, up 1.5% from April 30, 2024. Excluding tax arrears under processing and those subject to complaints or litigation, estimated total tax arrears as of May 31, 2024, were VND 176,491 billion, up 1.5% from April 30, 2024.

Regarding the composition of tax arrears, difficult-to-collect arrears accounted for 16%; collectible arrears accounted for 57.5%, comprising tax and fee arrears at 32.3% and land use levy and land rental arrears at 25.2%; administrative tax penalties and late-payment interest on collectible arrears accounted for 14.8%; tax arrears under processing accounted for 4.5%; and tax arrears subject to complaints or litigation accounted for 7.2%.

According to the General Department of Taxation, the increase in tax arrears as of May 31, 2024, compared with December 31, 2023, was primarily attributable to land-related arrears. General difficulties in the economy and capital markets adversely affected real estate businesses, leading to a sharp increase in arrears on land-related payments. In addition, estimated tax arrears as of May 31, 2024, increased because taxpayers had not promptly paid amounts due under their 2023 corporate income tax finalizations or deferred tax amounts whose extension periods had expired.

Mai Xuan Thanh, Director General of the General Department of Taxation, instructed tax authorities at all levels to closely monitor taxes and fees with extended payment deadlines and urge taxpayers to pay fully and promptly, avoiding new arrears and late-payment interest. He also called for accurate classification of tax arrears to ensure appropriate management and collection measures in accordance with regulations.

Tax arrears managed by customs authorities as of December 31, 2022, totaled VND 7,298.7 billion (including VND 5,853.7 billion in arrears on taxes collected definitively and VND 1,445 billion in arrears on provisionally collected taxes), up 3.8% (VND 270.7 billion) from 2021 (VND 7,298.7 billion/VND 7,028 billion). Specifically, overdue taxes collected definitively totaled VND 5,853.7 billion, up 4.9% (VND 272.9 billion); overdue provisionally collected taxes totaled VND 1,445 billion, down 0.4% (VND 6 billion).

The consolidated audit results at the General Department of Vietnam Customs showed that 18 of 27 customs departments collected tax arrears amounting to less than 10% of the targets assigned by the General Department, including six departments that were assigned targets but made no collections. The classification of arrears on taxes collected definitively as difficult to collect as of December 31, 2022, remained inconsistent with taxpayers’ status…

According to reports from tax and customs authorities, cumulative debt freezing and cancellation of penalties and late-payment interest from the start of implementation of the Resolution through June 30, 2023, were as follows: debts totaling VND 28,398.2 billion were frozen for 704,614 taxpayers; late-payment penalties and late-payment interest totaling VND 8,773.4 billion were canceled for 390,074 taxpayers.

Low estimates do not encourage state budget revenue collection

Following these findings, a reporter from the State Audit Newspaper spoke with Assoc. Prof. Dr. Nguyen Thi Phuong Hoa of the Institute of Postgraduate Education, National Economics University (NEU).

The audit report on the 2022 state budget final accounts recently submitted to the National Assembly by the State Audit Office of Vietnam (SAV) shows that domestic revenue in 2022 exceeded the approved estimate by 22.9%. Although this was a positive result, how do inaccurate estimates affect the state budget balance?

State budget revenue estimates that are low relative to actual revenue may also lead to low state budget expenditure estimates, thereby limiting spending on social welfare programs and public investment. Restricting spending on social welfare programs adversely affects the achievement of inclusive economic development goals. Restricting public investment spending contributes to higher unemployment and lower economic growth. Alternatively, low state budget revenue estimates may lead to higher planned Government borrowing to offset the low revenue, increasing public debt and interest costs and putting pressure on the state budget balance in the following year.

In addition, state budget revenue estimates that are low relative to actual revenue do not provide an incentive to step up revenue collection during budget execution.

Through its audits, SAV found that underrecording and underreporting revenue and incorrectly determining expenses, resulting in understated taxes, fees, charges and other amounts payable, continued at many entities, leading to an additional VND 3,841 billion payable to the state budget. What does this situation indicate?

This situation shows that state budget revenue collection agencies need to continue improving the effectiveness of their collection activities in practice. These agencies should adopt SAV’s audit recommendations to improve their state budget revenue collection activities. Revenue shortfalls in practice may stem from newly emerging economic activities, such as online sales. Therefore, state budget revenue administration agencies need to promptly study and issue new tax calculation regulations applicable to these new activities.

The audit results show that tax arrears continued to rise in 2022. For example, tax arrears managed by tax authorities increased by 36% from 2021 (an increase of VND 41,952.9 billion). Could you analyze the effects of rising tax arrears on state budget revenue and the economy?

Rising tax arrears lead to low actual state budget revenue, leaving the state budget short of cash to fund public spending and public investment. This may slow public investment disbursement and adversely affect economic growth. State-funded social welfare programs may also be delayed or scaled back, affecting the goal of an inclusive economy. Recurrent expenditure for administrative agencies and public service institutions may also be delayed or deferred, affecting their planned activities.

Could you suggest some solutions to address shortcomings and improve the effectiveness of revenue administration by tax authorities today?

In my view, SAV’s recommendations on strengthening state budget revenue collection need to be implemented. At the same time, new economic activities need to be studied so that new regulations can be issued for collecting taxes on these activities. In addition, scientific and technological advances, such as information technology and artificial intelligence, need to be applied to oversee tax declarations and tax inspections involving organizations and individuals.

Thank you for speaking with us!