Banks are required to provide account data and transaction information, such as balances and transaction figures, of organizations and individuals to the tax authorities. This allows them to cooperate with tax authorities in implementing tax enforcement measures.
1. The basis for the formation of regulations when banks provide account data.
According to the Organization for Economic Cooperation and Development (OECD) 2020 Report on Improving Access to Information for Tax Purposes, insufficient access to banking information is a hindrance to tax administration and law enforcement. According to a report by the Tax Legal Network (TJN) on November 20, 2020, countries are losing a total of over US$427 billion annually in tax revenue due to international corporate tax abuses and private tax evasion.
The lack of access to banking information has facilitated money laundering schemes to succeed by manipulating criminal proceeds to appear as illicitly sourced through the banking system. This also fuels tax inequality between taxpayers who comply with tax laws and those who seek to avoid or evade taxes.
Furthermore, if tax authorities lack the authority to request bank information, it will significantly reduce tax revenue. Lack of access to bank information can increase tax administration costs and compliance costs for taxpayers.
Refusing to provide customer information to tax authorities can also lead to voluntary non-compliance with tax regulations, especially as more and more individuals receive income from online advertising services like Google, Yahoo, YouTube, or e-commerce businesses through platforms such as Amazon, Lazada, Tiki, Shopee, etc. Revenue from online advertising and sales services may not be declared or may be inaccurately declared, and transaction data may be modified or deleted after transactions. Tax evasion is widespread across all sectors, causing serious losses to the state budget.
2. Regulations requiring banks to provide information and data on organizational and individual accounts to the Tax authorities.
Decree 126/2020/ND-CP, guiding some provisions of the Law on Tax Administration, effective from December 5, 2021, includes new regulations on the responsibility of commercial banks in providing taxpayer account information to tax authorities for inspection, examination, and determination of tax obligations.
Article 30. Duties and powers of commercial banks and payment intermediary service providers
"2. Commercial banks are responsible for providing the tax authorities with information about taxpayers' payment accounts opened at the bank as follows:
a) At the request of the tax authorities, commercial banks shall provide payment account information for each taxpayer, including: account holder's name, account number according to the Tax Identification Number issued by the tax authorities, account opening date, and account closing date.
b) The provision of account information under point a) of this clause shall be made for the first time within 90 days from the effective date of this Decree. Updates to account information shall be made monthly within the 10th day of the following month. The information shall be provided electronically.
c) Commercial banks shall provide transaction information through accounts, account balances, and transaction data upon request from the head of the tax administration agency to serve the purposes of inspection and verification to determine tax obligations and to implement coercive measures to enforce administrative decisions on tax management in accordance with tax laws.
d) The tax administration agency is responsible for maintaining the confidentiality of information and is fully responsible for the security of that information in accordance with the Law on Tax Administration and relevant legal regulations.. "
Accordingly, information such as account transactions, balances, and transaction data are provided by the bank upon request from the head of the tax authority. This serves the purpose of inspection and verification to determine tax obligations. The tax authority is responsible for maintaining the confidentiality of this information and is fully accountable for its security.
Furthermore, every month, commercial banks must provide payment account information for each taxpayer, including: account holder's name, account number based on the tax identification number issued by the tax authorities, account opening date, and account closing date.
In October 2021, the Head of the Inspection and Auditing Department (General Department of Taxation) stated that they had collaborated with and requested information from 45 commercial banks to enable the tax management sector to obtain data. According to the data provided by the banks, in Hanoi alone, there were over 18.300 organizations and individuals engaged in online sales activities, generating a total income of 1.462 billion VND from Google, Facebook, YouTube, etc. Through this process, the tax authorities guided these organizations and individuals in declaring and paying taxes, and collected nearly 14 billion VND in back taxes.
In addition, banks are also required to deduct and pay the tax obligations of foreign suppliers with permanent establishments in Vietnam who conduct e-commerce business on digital platforms with domestic organizations and individuals.
Specifically, after identifying overseas suppliers who have not registered, declared, or paid taxes, the General Department of Taxation will notify commercial banks and payment intermediaries so that these entities can identify transaction accounts and deduct and pay the tax obligations on their behalf.
If individuals purchase goods or services using cards or other forms of banking or intermediary payment that cannot be deducted or remitted, these entities are responsible for monitoring the amount transferred to overseas suppliers and submitting it to the General Department of Taxation monthly.
3. Impact on organizations and individual businesses
- Information security and disclosure of private matters: Many organizations and individuals are very concerned about the information in their accounts being leaked. This is especially true for confidential business information, as well as other information that could benefit competitors, when accounts are provided to the Tax authorities without the account holder's consent.
- Explaining transactions not recorded in the books but appearing in bank statements or subsidiary ledgers: Discrepancies in transactions between bank statements and accounting records, when audited by tax authorities, will require organizations and individuals to explain the reasons for these differences.
- It is difficult or impossible to adequately explain why transaction data related to personal or business purchases in accounts differs from tax declarations: The occurrence of too many transactions in one or more bank accounts, as well as the inability of accounting records to reflect all transactions in reports, makes it difficult to track, manage, and remember to explain each discrepancy in detail.
- Collection of corporate income tax, personal income tax, and late payment penalties resulting from under-declaring taxable revenue: When an explanation cannot be provided, the organization or individual will be subject to tax assessment, meaning additional taxes and penalties will be incurred.
- The trading account was frozen to enforce collection as requested by the Tax authorities.
- Impact on the reputation and image of individuals and organizations engaged in business: Banks will freeze the accounts of organizations and individuals to collect taxes as required by the Tax authorities after discovering violations.
- Business operations face difficulties due to scrutiny from these two agencies: When there are signs of underreporting revenue, underpaying taxes, or irregularities in bank statements, organizations and individuals are likely to attract significant attention from tax authorities in their future business activities.
4. What solutions are available for businesses in the current situation?
- Thoroughly understand and familiarize yourself with current regulations that directly affect businesses, especially online businesses and businesses on e-commerce platforms and social networks.
- Regularly check and compare transaction data across bank accounts and accounting records to detect any discrepancies.
- Restructure the accounting system to comply with current regulations.
- Identify existing issues that are inconsistent with regulations, leading to potential future risks for the business, and then make adjustments, declare, and pay additional taxes if necessary.
- Verify and reconcile all income and expenses related to revenue (including cash payments) across all business channels to avoid underreporting sales revenue.
- Gather all necessary documentation when dealing with foreign contractors as proof of expenses incurred during the period, to avoid being disallowed for tax purposes.
5. The Role of Experts
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