Resolutely Preventing Tax Refund Frauds

The tax sector conducted 55,840 inspections in the year to October 31, or 75.56% of the inspection plan in 2022 and 106.8% that in the same period of 2021. VND51,221.8 billion was processed during these inspections, equal to 138.79% of the amount in the same period of 2021, including VND12,232.8 billion of increased tax; VND1,805.7 billion of reduced tax; and VND37,183.4 billion of reduced loss. Tax fraud is becoming increasingly sophisticated, so the General Department of Taxation has recently sent a message on the resolute handling of tax refund fraud.

Signs of tax refund fraudulence

The General Department of Taxation (GDT) said that using illegal invoices and declaring reduced input value-added tax (VAT) to file for VAT refunds are tricks detected and fought fiercely by tax authorities.

Tax tricks and frauds are largely found in intermediary stages (F1 and F2) of goods purchase and selling, according to GDT. Intermediaries, after issuing invoices to F1 companies, temporarily halt doing business or flee while revenue and tax declared by intermediaries are deliberately falsified. Sellers (F2) declare small revenue but buyers (F1) declare a large deduction. Payments verified by tax authorities are settled via banks; however, payment for goods and money withdrawal from the bank all take place, by the same person.

In addition, companies with VAT refunds use illegal invoices (purchased from companies without any business activity) or use invoices issued by companies that abandoned their business addresses, changed their operating status and continuously use many different localities to declare and deduct input VAT and apply for VAT refunds.

Enterprises entitled to tax refunds make documents and records to apply for tax refunds but they have no purchased goods, no warehouses and no means of transportation, but buy purchase invoices to legalize their inputs or use invoices issued by enterprises that abandoned their business address (from July 1, 2022 back).

Besides commonly violated VAT refunds, according to GDT, enterprises whose imported goods are electrical components falsified their export value. When importing goods, they declare a very low import value but when others export, they declare a very high value compared to the import price value. The difference is over 50 times while the origin of goods is not clear.

Fighting against tax refund fraud

Mr. Vu Manh Cuong, Director of the Inspection Department, GDT, said that GDT defined that improving the effects of inspection and the fight against tax refund fraud is the most important task. On that basis, GDT introduced consistent and firm solutions to identify violators and take professional inspection measures and promptly recollect refunded tax.

GDT developed and deployed criteria and classification indicators to deal with VAT refund records and identify enterprises having potential VAT refund violations for inspection at the back of VAT refunds. GDT also completed the invoice verification support system at tax offices (which allowed tax authorities to send and respond to invoice verification requests throughout the tax sector); sped up verification time and centralized information for verifying the origin of goods; improved tax refund mechanisms and policies; and developed and launched e-invoices. E-invoices have been deployed to all companies, organizations, business households and business individuals since July 1, 2022 to further control information about VAT refunds and prevent tax loss.

Tax authorities also intensified VAT refund inspections and closely monitored tax refund management, especially of high-risk items, to collect information and capture activities of companies showing signs of VAT refund violations for proper actions.

The tax sector gives priority to close cooperation with banks, customs, police and local authorities, as well as tax authorities in partner countries to verify transactions recorded on tax refund documents.

By Le Hien, Vietnam Business Forum