UNIVERSITÉ DE NICE SOPHIA ANTIPOLIS Institut d’Administration des Entreprises THANG LONG UNIVERSITY Hanoï, Vietnam INTERNSHIP REPORT SOLUTIONS TO INCREASE COOPERATE INCOME TAX COLLECTION OF FOREIGN DIRECT INVESTMENT ENTERPRISE BY HUNG YEN’S CITY TAX DEPARTMENT Submitted by: DANG ANH HOANG Under the guidance of Department Supervisor Academic Supervisor Vice Director’ Department Associate Professor, PhD Mr. NGUYEN Trong Uyen Mr. DAO Ngoc Tien University of Nice–Sophia Antipolis|Thang Long University DANG ANH HOANG UNIVERSITÉ DE NICE SOPHIA ANTIPOLIS Institut d’Administration des Entreprises THANG LONG UNIVERSITY MASTER OF INTERNATIONAL BUSINESS & MANAGEMENT INTERNSHIP REPORT SOLUTIONS TO INCREASE COOPERATE INCOME TAX COLLECTION OF FOREIGN DIRECT INVESTMENT ENTERPRISE BY HUNG YEN’S CITY TAX DEPARTMENT Academic Supervisor Associate Professor, PhD Mr. DAO Ngoc Tien Department Supervisor Vice Director’ Department Mr.
NGUYEN Trong Uyen Author: Dang Anh Hoang September, 2018 i Thư viện ĐH Thăng Long University of Nice–Sophia Antipolis|Thang Long University DANG ANH HOANG ACKNOWLEDGEMENT I owe a special debt of gratitude towards my academic supervisor, Assoc. DAO Ngoc Tien, for his patient and kindhearted guidance. My internship report could not have been completed without his enthusiastic and constant encouragement, and constructive supervision. My special gratitude is extended to all professors, faculty members and staff at Thang Long University and University of Nice Sophia-Antipolis for their support and the valuable knowledge during my study.
Many thanks for the support of Mr. NGUYEN Trong Uyen, deputy Director of Hung Yen City’s Tax Department as well as the other colleagues in Hung Yen City’s Tax Department for their valuable information and enthusiastic support for this report. Last but not least, the deepest and most sincere gratitude goes to my family, my classmates and my friends for their boundless support, abundant love and encouragement throughout my master studying. ii University of Nice–Sophia Antipolis|Thang Long University DANG ANH HOANG ABSTRACT The report is the result of my four-month internship from May to August 2018 which was taken at Hung Yen City Tax Department.
Based on knowledge that I learned from master courses like International Trade Taxation, Financial Risk Management and by using methods of collecting, comparing, evaluating and synthesizing secondary data, the report presents my general understanding about tax law, tax management, General Department of Taxation, Hung Yen Department of Taxation. I also pointed out some problems in the process of collecting tax from FDI enterprises, suggested some changes and recommendations for the government, the managers, the companies. With the effort of myself, and the help of members at Tax Department, I completed the internship with good results. However, due to the limitations of reasoning as well as practical experiences, the report cannot avoid some flaws that I look forward to receiving comments from the Council for better results.
iii Thư viện ĐH Thăng Long University of Nice–Sophia Antipolis|Thang Long University DANG ANH HOANG TABLE OF CONTENTS INTRODUCTION CHAPTER 1: GENERAL DEPARTMENT OF TAXATION’S BACKGROUND 1.1 General Department of Taxation’s Introduction 1.2 General Department of Taxation’s Milestones 1.2 GENERAL DEPARTMENT OF TAXATION’S ORGANIZATION CHAPTER 2: DEPARTMENT OF TAXATION’S STRUCTURE AND ORGANIZATION 2.1 OVERVIEW OF HUNG YEN CITY DEPARTMENT OF TAXATION 2.1 The process of development and position 2.2 Main missions and Tasks 2.3 Hung Yen City Tax Department’s revenue in recent years 2.2 THE STRUCTURE OF HUNG YEN CITY DEPARTMENT OF TAXATION 2.1 Hung Yen City Department of Taxation’s Structural Chart 2.3 Intern’s position CHAPTER 3: THE ASSIGNED TASKS AND GOALS 3.1 The tasks assigned to my position 3.2 The link between the subject matter and my position 3.3 The goals of the internship program at Hung Yen Department of Taxation 3.4 The values which can be bought to the Department 3.2 THE THEORETICAL BACKGROUND APPLIED IN THE INTERNSHIP 3.1 Subjects applied through my academic year in Master AMI 3.2 Putting knowledge to practice CHAPTER 4: CIT COLLECTION AT HUNG YEN CITY’S TAX DEPARTMENT 4.1 THE WAY TO REACH THE GOALS iv University of Nice–Sophia Antipolis|Thang Long University DANG ANH HOANG 4.2 TAX AVOIDANCE AND EVASION FROM FOREIGN DIRECT INVESTMENT ENTERPRISE 4.3 Intra-company Loans 4.4 Parent Overheads Costs 4.3 CAUSES OF THE PROBLEMS 4.4 SOLUTIONS TO PREVENT AND FIX THE PROBLEMS 4.1 Tax administration’s reform 4.2 Tax policies’ reform 4.3 Supporting solutions CHAPTER 5: CONCLUSION AND RECOMMENDATIONS 5.1 RECOMMENDATIONS FOR HUNG YEN CITY TAX DEPARTMENT 5.1 Promote and support taxpayers 5.2 Examine and audit taxpayers 5.4 Improve human resource’s quality 5.2 MEETING THE GOALS 5.3 CONCLUSION REFERENCES LIST OF TABLES LIST OF FIGURES INDEX/GLOSSARY APPENDIX v Thư viện ĐH Thăng Long University of Nice–Sophia Antipolis|Thang Long University DANG ANH HOANG INTRODUCTION Hung Yen is a province located in the Red River Delta, in the Northern Focal Economic Zone and the Hanoi- Hai Phong– Quang Ninh Economic Triangle, a strategic location to attract the foreign direct investors in the northern area of Vietnam. According to statistics, FDI companies contributed more than 23.4% of the city's GDP. FDI companies provide relatively advance technology, using more employees to create jobs for indigenous people, contributing significantly to revenue of local state budget. In particular, in 2017, the FDI contributed to the city budget of more than 600 million USD accounted for 18% of province domestic revenue.
Also, in 255 new investment projects in Hung Yen, there was 42 belongs to FDI enterprises with total capital of 220. In general, up to 2017, Hung Yen has 402 FDI projects with total investment of 3. Virtually all governments are keen to attract foreign direct investment (FDI). It can generate new jobs, bring in new technologies and, more generally, promote growth and employment.
The resulting net increase in domestic income is shared with government through taxation of wages and profits of foreign-owned companies, and possibly other taxes on business (e. At the same time, policy makers face many complex issues and questions in this area, such as: How sensitive is FDI to taxation? What are the main policy considerations guiding the taxation of inbound investment, and outbound investment? How have countries responded to pressure of reducing taxes on FDI? How to fight and ensure that all violated actions of tax laws is reduced to a minimum level? Recognizing the severity of risks and the need for prevention solutions, on the basis of my knowledge and research, I chose the topic ―Solutions to increase cooperate income tax collection of foreign direct investment enterprise by Hung Yen City Tax Department‖ during my internship time. The report follows five chapters: Chapter 1: GENERAL DEPARTMENT OF TAXATION’S BACKGROUND Chapter 2: DEPARTMENT OF TAXATION’S STRUCTURE AND ORGANIZATION Chapter 3: THE ASSIGNED TASKS AND GOALS Chapter 4: CIT COLLECTION AT HUNG YEN CITY’S TAX DEPARTMENT Chapter 5: CONCLUSION AND RECOMMENDATIONS The report exposed my understanding in tax law of Vietnam, tax management after the internship and how I applied my knowledge from master program to solve problems in reality. vi University of Nice–Sophia Antipolis|Thang Long University DANG ANH HOANG CHAPTER 1: GENERAL DEPARTMENT OF TAXATION’S BACKGROUND 1.1 General Department of Taxation’s Introduction The General Department of Taxation (GDT) is a governmental authority under the Minister of Finance with functions to perform the state management of domestic revenues nationwide, including taxes, charges and fees and other state budget revenues (below collectively referred to as taxes), and to manage taxation in accordance with law.
The General Department of Taxation has the legal entity status, a seal bearing the national emblem, State Treasury accounts and headquarters in Hanoi city. Main tasks and missions of GDT are as follows: - To draft laws and resolutions of the National Assembly; draft ordinances and resolutions of the National Assembly Standing Committee; draft decrees of the Government and draft decisions of the Prime Minister on tax administration; - To develop strategies, master plans, national target programs and important programs of action, schemes and projects on tax administration; - To estimate annual tax-revenue in accordance with the State Budget Law. - To organize the implementation of legal documents, strategies, master plans, plans, programs, projects and schemes on tax administration after they are promulgated or approved by competent authorities. - To propagate, disseminate, and educate about, the tax law.
- To guide and explain tax policies of the State; to provide support for taxpayers to fulfill the tax payment obligation in accordance with law. - To guide, direct, examine, supervise and implement the operational processes of tax registration, issuance of tax identification numbers, tax declaration, calculation, payment, refund, exemption and reduction, and remission of tax arrears and fines; the operational process of tax accounting, and other relevant operations. - To decide on or submit to competent authorities for decision tax exemption, reduction or refund, extension of the time limit for submission of tax declaration dossiers, extension of the time limit for tax payment, or remission of tax arrears or fines. - To inspect taxpayers’ payable tax amounts at the request of competent state agencies.
- To authorize agencies and organizations to directly collect certain taxes in accordance with law. 1 Thư viện ĐH Thăng Long University of Nice–Sophia Antipolis|Thang Long University DANG ANH HOANG - To decide on or submit to competent authorities for decision tax exemption, reduction or refund, extension of the time limit for submission of tax declaration dossiers, extension of the time limit for tax payment, or remission of tax arrears or fines. - To carry out administrative reform according to the objectives and contents of the administrative reform program approved by the Minister of Finance. - To organize and manage the tax sector’s emulation and commendation of tax agencies, taxpayers and other organizations and individuals that record outstanding achievements in tax administration work and the performance of tax obligations towards the state budget in accordance with law.
- To manage and archive tax dossiers, documents and forms and manage allocated funds and assigned assets; to implement the finance and payroll management mechanism under regulations of competent agencies.2 General Department of Taxation’s Milestones The brief history of General Department of Taxation goes through three phases: Phase 1 (from 1945 to 1975): When the country was created, Taxation Department was merged with Customs Department with small responsibilities. Phase 2 (from 1975 to 1989): When the country was independent, Government divided tax and customs, tax collection increased dramatically, reduced loans and aids from foreign countries. Phase 3 (from 1975 to now): When the country is more open, globalization is changing quickly, General Department of Taxation has more specific defining the functions, tasks, powers and organizational structure of the general department of taxation under the ministry of finance. The department’s historical milestones are as follows: - September 10th, 1945: Ministry of Home Affairs, VO Nguyen Giap on behalf of the President of the provisional government signed Decree No.
27/SL establishing the Department of Tariffs and Taxes. This decision is a legal basis and a prerequisite for Vietnam's taxation sector to be born and developed. - July 17th, 1951: The Ministry of Finance issued Decree No. 63/ND establishing a system of industrial and commercial taxation.
Taxation system had headquarter, local provinces and local districts. - November 7th, 1961: the Government issued decree 197/CP on Taxation Structure. 2 University of Nice–Sophia Antipolis|Thang Long University DANG ANH HOANG - August 7th, 1990: The Council of Ministers promulgated Decree No. 218-HDBT on the establishment of a consolidated state tax system from three systems.
- October 28th, 2003: Decision No. 218/2003/QĐ-TTg defining the functions, tasks, powers and organizational structure of the general department of taxation under the ministry of finance (and changed by Decision No.115/2009/QD- TTg of September 28, 2009). - November 29th, 2006: Law of tax management No.78/2006/QH11 passed by Congress gave a full principal of tax law in Vietnam. - December 31st, 2017: For the first time, Vietnam Tax Collection surpassed one million billion VND (about 50 billion USD)1, that included revenue from non-state sector increased by 23%, income from FDI enterprises increased by 20%, personal income tax increased by 22% compared to 2016.
1 ONLINE NEWSPAPER OF THE GOVERNMENT, 2018. The Prime Minister attends the conference on implementation of tax tasks in 2018 [Online] (Updated 31 January 2018) Available at: https://goo.