Prohibition of exit due to a tax debt of 1 million dong, in recent days the press has continuously reported on the fact that many business leaders are prohibited from leaving the country due to tax debts, even with very small amounts of less than 1 million dong. Many opinions believe that delaying the exit of business leaders just because of a tax debt of 1 million dong is a bit excessive. Is it true or not? Let's find out in this article.

Recent incidents

In the past month, the customs departments under the Ho Chi Minh City Customs Department have issued decisions to temporarily postpone the exit of 12 individuals who are legal representatives of businesses due to tax debts. It is noteworthy that the temporary postponement of exit is applied to cases of tax debts with significant differences in amounts, regardless of severity. Not only in Ho Chi Minh City, the tax department in the Bien Hoa Vinh Cuu area, under the tax department of Dong Nai province, has also sent notifications requesting the immigration management department, Ministry of Public Security, to temporarily postpone the exit of 64 individuals who are legal representatives of businesses with tax debts. Earlier in October 2023, the tax department in District 7 and Nha Be district, under the Ho Chi Minh City Tax Department, also requested the competent authority to prohibit the exit of 11 individuals who are legal representatives of 11 businesses with tax debts. In addition, there are cases where many people only find out about the temporary postponement of their exit due to tax debts when they arrive at the airport. According to Mr. Nguyen Tien Dung, Deputy Director of the Ho Chi Minh City Tax Department, the law allows the tax authorities to send notifications requesting the immigration management department to temporarily postpone the exit of tax violators. Mr. Dung also affirmed that after these individuals fully pay their taxes, the tax authorities will inform the immigration management department to lift the temporary exit ban.

Are there other measures?

Although the temporary postponement of exit is applied to businesses with tax debts, the reality shows a significant difference in the amount of tax debts between cases, with some businesses owing tens of billion dong. While there are also businesses owing only a few hundred thousand dong, such as the case of the director representing the legal entity of Gia Thang Chemical Trading Limited Company. The individual requested to postpone their exit because this business owes over 997,000 dong in taxes, not including late payment penalties. According to the viewpoint of businesses, the ultimate goal of applying sanctions against businesses with tax debts is to recover the owed amount for the state budget. Therefore, the measure of forcibly freezing the accounts of businesses should be given top priority. A business director in District 7 shared that in 2023, he received a notification from the District 7 Tax Department regarding his company's value-added tax debt of about 10 million dong. The tax authority required the business to pay the tax within 5 days from the date of issuance of the notification, otherwise, enforcement measures including requesting a temporary exit ban would be taken. The director stated that the company's accountant had completed the tax report but forgot to pay the tax. As soon as we received the notification, we immediately paid the tax and the fine. He also expressed the view that we did not intentionally evade taxes, but it was a mistake by the professional department and was rectified immediately after receiving the tax authority's notification. However, through this incident, I realized that the tax authorities could choose other methods to recover tax debts and support businesses more effectively.

The initial tax enforcement measures include freezing bank accounts, notifying that invoices are no longer valid. If the business still does not pay taxes, after applying these measures, the tax authorities must apply many other measures. Among them is the proposal to ban the exit of the legal representative, the tax authority is the unit responsible for the legal liability of the business owner being banned from leaving the country. Related to the fact that a business owes only a few million dong in taxes is also prohibited from leaving the country, an inspector said one of the important tasks of the tax sector is to focus on recovering tax debts, ensuring revenue for the state budget. Therefore, the tax authorities must apply enforcement measures to ensure that businesses fulfill their responsibility to pay taxes. If the superiors do not implement this, questions will be raised as to why the tax authorities do not comply with the legal provisions. However, the inspector also believes that flexible measures to prohibit businesses with tax debts from leaving the country need to have state policies and adjustments to tax laws.

Tax debt, even one dong, is a violation

Lawyer Nguyen Quoc Toan, director of IAM Law Firm in Ho Chi Minh City, affirmed that: Tax debt, even just one dong, is a violation of the law. Individuals and businesses involved in overdue tax debts must be treated equally. According to the law, taxes do not differentiate between rich and poor, there is no such thing as owing little or owing a lot, only overdue debts, which means a violation. Lawyer Toan cited the story of an American man, who, just because of a $500 house tax, paid it but forgot about the accumulated interest. During the time the payment was sent, it was $8.41, and the result was that three years later, his house was seized worth $60,000. Lawyer Toan emphasized that debts of over $8 can also lead to asset seizure, the principle of US law is that failing to pay taxes in the previous year the property owner will be considered as having tax debts. Applied to a case where a business owes nearly 1 million dong in taxes, Lawyer Toan said that this amount may seem small at first, but if you consider the overdue interest for the past 11 years, the debt will certainly not stop at 1 million dong.

Similarly, Associate Professor Dr. Dinh Trong Thinh, from the Academy of Finance, an expert in financial economics, stated: Taxes are the highest legal regulations, contributing to the state budget that every individual, business with revenue, and profit must pay. In principle, the business and its legal representative must calculate, declare, and comply with tax payment. Associate Professor Dr. Thinh explained: Simply put, decisions to temporarily suspend exit or enforce customs related to tax debts aim to ensure the legal compliance of businesses and entrepreneurs who have established businesses. If you are the legal representative of a business, you must prioritize legal compliance. Notices of tax debts and enforcement measures are sent many times to businesses by the management agency. During that time, the legal representative of the unit cannot claim ignorance or think that a small amount of money is not worth caring about. I believe there should be no differentiation or leniency for cases of tax debts being overdue like this.

Who is responsible for late tax payments?

In the context of tax authorities tightening control and many businesses believe that tax authorities should also be responsible for late tax payments. Recently, a limited liability rubber investment company in Vietnam said: The company has been late in tax payments for about 2 years, with an amount of nearly 70 billion dong. Even the amount of late tax payments is larger than the company's charter capital, forcing the company to suspend operations because it does not have the capital to circulate. A company representative said that despite facing many difficulties, the company cannot dissolve because if it dissolves, the procedures to receive tax refunds in the future will be even more difficult. Being detained with tens of billions of dong in value-added tax makes the company lose financial resources, unable to fulfill export orders, and continuously lose customers. Previously, in 2023, many wood industry businesses also reflected on the difficulty of receiving value-added tax refunds.

For example, the case of Focus Vietnam Joint Stock Company being late in tax payments of 355 billion dong and has submitted 29 applications for tax refunds, from June 2020 to February 2023. Some businesses said that they were set up by other businesses to close and escape from the registered business address while the tax refund applications need to verify invoices and documents from these businesses. According to Lawyer Nguyen Quoc Toan, the value-added tax refund is essentially the tax money that businesses have paid when buying goods domestically to process for export. This means that businesses have advanced money to help the state budget, so after businesses meet the requirements, the tax authorities are responsible for refunding. However, fulfilling the complete documentation, invoices for purchased goods to be refunded is not something that every business can do. Therefore, most applications are delayed due to not meeting the conditions or being stuck in the process of verifying invoices and documents.

This situation is particularly common in the context of a large number of businesses closing down, going bankrupt, up to thousands of businesses every month. Lawyer Toan said that verifying invoices is an internal matter of the tax sector, however, the tax sector must ensure that the legal provisions are to resolve tax refund applications for businesses within 40 days. The responsibility of the tax sector is not only to collect taxes correctly, sufficiently, and on time but also to be responsible for preventing tax evasion and tax fraud. Especially in preventing the misappropriation of state budget through value-added tax refunds. If thorough investigations are not conducted to prevent the misappropriation of the state budget, the tax department will be held accountable. In practice, there is no regulation on how tax authorities who delay tax refunds will be handled.

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