Risk of revenue loss from the trick of "splitting up" businesses to evade income tax

On the morning of April 23, the National Assembly discussed the draft Law amending and supplementing a number of articles of the Law on Personal Income Tax, the Law on Value Added Tax (VAT), the Law on Corporate Income Tax and the Law on Special Consumption Tax.

Need a mechanism to control the subdivision of businesses to enjoy incentives

Giving opinions on the draft Law, delegate Thach Phuoc Binh (Vinh Long Delegation) said that the mechanism for determining the taxable revenue threshold is a noteworthy innovation. The draft does not rigidly stipulate a specific revenue level but assigns the Government to decide according to the socio-economic context of each period, applying uniformly to individuals, business households and businesses.

This approach helps tax policies to be flexible and promptly reflect fluctuations such as inflation, living standards, and people's income, thereby better ensuring the rights of taxpayers, especially small and micro businesses" - the delegate said.

In addition, the addition of regulations on corporate income tax exemption for businesses with revenue below the prescribed threshold is a positive sign, contributing to reducing financial burden, compliance costs, creating conditions for the startup ecosystem and promoting the development of the small business sector.

Along with that, it is necessary to clearly stipulate the cycle of reviewing and adjusting the revenue threshold, for example, periodically every 2 years, to avoid policies becoming outdated.

It is necessary to have a mechanism to control the subdivision of enterprises to enjoy incentives; supplement regulations on related parties and a revenue consolidation mechanism for enterprises with the same owner or control relationship.

Another issue that delegates noted is the risk of taking advantage of policies when applying the revenue threshold for corporate income tax exemption.

In practice, there may be a situation where businesses subdivide their operations into many legal entities to keep revenue below the tax exemption threshold. Therefore, he suggested that it is necessary to supplement regulations on related parties, as well as a revenue addition and subtraction mechanism for businesses with the same owner or control relationship, in order to ensure fairness and combat budget revenue loss.

In addition, the Vinh Long delegation delegate proposed to study applying a unified revenue threshold for personal income tax, value-added tax and corporate income tax for the same business scale.

This unification will help people easily determine tax obligations, while reducing management costs for tax authorities.

Proposal for a taxable income frame from 1 - 3 billion VND

Delegate Phan Duc Hieu (Hung Yen Delegation) also expressed a unified viewpoint on the approach of assigning the Government to decide the tax-exempt revenue threshold for individuals and business households.

However, to ensure a legal basis, in accordance with reality, the delegate proposed that the Law should stipulate a framework including the minimum level and the maximum level. Then, assign the Government to decide a specific threshold within that framework.

I propose this framework from 1 - 3 billion VND. Then the Government will decide the specific threshold in this framework" - delegate Phan Duc Hieu said and said that this regulation is safe and most suitable for practice, safety, and the constitution.

In addition, the delegate from the Hung Yen delegation said that the National Assembly should also decide on the minimum and maximum thresholds.

Because if the minimum threshold is too low, it will create a burden of compliance costs and management costs. And if the maximum threshold is too high, it will affect budget revenue and may create a trend of business establishments "not wanting to grow".

This regulation method both ensures flexibility for the Government and ensures the authority to decide on core issues of the National Assembly.