HO CHI MINH CITY — In the midst of emerging regulatory developments in Southeast Asia, particularly in Vietnam, the nation is readying to utilise regenerative artificial intelligence tools to detect and deter tax evasion. This high-tech approach to enforcement is already showing positive outcomes.
Increased tax contributions have been noted from large tech firms such as Facebook, Microsoft, and Lazada, largely due to the recent implementation of an electronic filing system. According to the tax agency, overseas companies, primarily U.S. platforms like Netflix and Google, have contributed 3.9 trillion dong ($165 million) in taxes in the first half of 2023, an increase from 3.4 trillion dong for most of 2022. This increase has come about after the introduction of a tax portal for overseas service providers. The tax office has also prioritised other app creators like TikTok, Apple, and Shopee.
Dinh Quang Thuan, a partner at GV Lawyers, noted to Nikkei Asia that the surge in tax collections from tech firms, particularly those operating internationally, in conjunction with the application of AI technology for tax enforcement, highlights Vietnam's transition towards a stricter and tech-forward stance on tax compliance.
The one-party state, a significant market for Facebook and TikTok, has increased its oversight as part of its efforts to tighten control over Big Tech and to participate in global initiatives to combat tax evasion.
According to the General Department of Taxation, the taxation revenue from the e-commerce sector has more than doubled in 2022, reaching 716 billion dong. As the department advocates for a shift towards digital operations, it is also undergoing its digital transformation.
Officials intend to leverage AI software to identify companies that exhibit unusual billing behaviour, such as frequently issuing invoices, issuing invoices for exceptionally high amounts, or any other patterns indicative of attempts to reduce taxable revenue.
Wolfram Gruenkorn, managing partner at WTS Tax Vietnam, expressed that the utilisation of advanced IT systems, including AI, will help identify foreign service providers attempting to evade tax obligations, thereby reducing the significant influence local tax officers currently hold.
In the last month of the previous year, the Finance Ministry expressed its approval for the use of AI in risk management. It also revealed its preparation to enter "multilateral agreements on the right to tax income from the digital economy."
Joining a 139-government agreement, Hanoi has agreed to enforce a 15% global minimum tax on companies starting from 2024. This agreement was orchestrated by The Organisation for Economic Co-operation and Development to address the "challenges arising from digitalization and globalisation of the economy."
Vietnam, in recent years, has introduced stricter controls over internet companies, covering aspects from tax registration to content removal orders. Simultaneously, it continues to battle misinformation and protect civil liberties enshrined in its constitution, even as it has taken steps such as arresting users posting unflattering content.
Last week, the tax agency announced that the number of foreign companies registered through the tax portal had risen to 57 from 42 at the end of 2022, partly to avoid a proposed system where banks would oversee their transactions and remit taxes on their behalf.
