Vietnam Considers Banning Exit for Minimal Tax Debt Amidst Evasion Concerns

A proposal by Vietnam's Ministry of Finance to temporarily suspend exit for individuals and businesses with tax debts as low as 1 million VND, provided they are no longer operating at their registered address, has sparked considerable debate. The Ministry justifies this stringent measure by citing the alarming reality of widespread tax evasion, with approximately 963,500 businesses and households having vanished while collectively owing over 32 trillion VND in taxes. The current statistics reveal that a significant portion of these delinquent taxpayers, specifically 287,330 businesses and 180,000 households, owe 1 million VND or more, accounting for over 99% of the total outstanding tax debt.

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The proposal by the Ministry of Finance to temporarily suspend exit if the tax debt is over 1 million VND and the business is no longer operating at its registered address is a tough measure, contributing to ensuring a healthy business environment.

The Ministry reports that the existing exit suspension policy has already prompted 7,100 taxpayers to settle their debts and have the restriction lifted, indicating its effectiveness as a deterrent. However, the proposed reduction in the threshold for individuals and businesses no longer operating at their registered address has drawn criticism. While some, like N.V.G., a business owner, acknowledge the need for a firm stance to ensure a healthy business environment, they suggest extending the notification period to 60 days and improving the speed and accessibility of tax violation alerts, likening them to instant bank notifications.

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The 1 million VND threshold is too low. I propose applying a uniform threshold of 50 million VND for individuals and 500 million VND for businesses and cooperatives.

Conversely, tax expert Nguyễn Ngọc Tú argues that the 1 million VND threshold is excessively low and advocates for a uniform threshold of 50 million VND for individuals and 500 million VND for businesses. He also suggests that foreigners and overseas Vietnamese returning to the country should face immediate exit suspension if any tax debt exists. From a Vietnamese perspective, this debate highlights the ongoing tension between enforcing tax compliance and facilitating business operations. While the government aims to curb tax evasion, which significantly impacts public revenue, concerns are raised about the potential for bureaucratic overreach and the impact on legitimate businesses facing temporary difficulties. The discussion reflects a broader effort to modernize tax administration and ensure fairness, but the proposed low threshold raises questions about its practicality and potential unintended consequences for the business community.

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With cases where the business is no longer operating at the registered address but still has tax debt, the Tax Management Law has stipulated that they are subject to exit suspension.