Time to win for Vietnam Tax Department on Facebook e-commerce case

Ho Chi Minh City’s tax department has handed a bill of VND9.1 billion ($401,300) to a Facebook retailer in a rare successful attempt to levy sales on social media.

A source from the department said that the tax declaration submitted by the cosmetics retailer was millions of dollars short compared to information acquired from the retailer’s banks.

Le Thi Thu Huong, deputy director of the department, said the sum was the biggest amount ever to be claimed by her agency from an online retailer for tax evasion.

The department contacted nearly 13,800 Facebook accounts earlier this year asking them to pay tax for businesses they were running on the social network, but few complied.

Facebook is the most popular social network in Vietnam with more than 52 million active accounts, and is also used as an e-commerce platform that tax authorities have struggled to keep track of.

Vietnam levies a 0.5 percent income tax and a 1 percent value added tax on sales of more than VND100 million ($4,400) per year.

Local tax authorities have recently stepped up efforts to collect taxes from online businesses that use Facebook and other social media sites such as Instagram and YouTube.

Tax departments in both Hanoi and Ho Chi Minh City have sent out tax demands to around 27,000 Facebook retailers in a move to target tax avoidance by online businesses.

Online sales in Vietnam have expanded rapidly in recent years, currently accounting for 3.39 percent of the country’s retail market. The total retail market grew 10.2 percent last year to $118 billion, mainly fueled by a growing middle-class with expanding disposable incomes and an increasing number of internet users.

In an effort to minimize tax losses, the Ministry of Finance is considering a plan to impose value added tax and income tax on sales with a value of VND1 million ($44) upwards, or multiple sales of a lesser value.