Synchronize solutions for detecting and strictly handling tax fraud

Assoc. Prof. Dr. Le Xuan Truong

Could you please tell us what methods of VAT refund fraud have been discovered and successfully handled by the authorities in recent years?

There were quite a lot of methods that were used to commit VAT refund fraud. Those had been exposed by the authorities, typically the following acts: forging false export dossiers of exported goods and services; rotating goods for export many times for one shipment; setting up “bogus” companies to sell invoices to other businesses in order to legalize the input of enterprises buying invoices (short selling invoices without goods or services) or establishing a “bogus” company just to issue input invoice in order to legalized for an enterprise trading smuggled goods.

The fraud case of Phat Petrol Trading Joint Stock Company (Phat Petraco) discovered and prosecuted by the investigative agency in Hai Phong in September 2020 was a typical example of the establishment of a bogus business to cheat on input VAT.

The situation of VAT fraud has taken place for many years, so what is the solution to improve the effectiveness of the fight against VAT refund fraud?

We’ve made this very clear in recent times. First of all, promptly amending and supplementing legal regulations on VAT and tax administration to close legal loopholes and prevent people from committing acts of fraud by taking advantage and appropriating state budget money.

Secondly, strengthening and improving the effectiveness of professional measures to monitor and detect enterprises showing signs of violations of the law in general and the law on VAT refund in particular.

The third was to improve efficiency and innovate tax inspection and examination methods. The fourth was to strengthen the coordination between state agencies in the fight against tax crimes and finally to strictly and promptly handle violations of law on tax.

At present, both administrative and criminal sanctions for VAT fraud are very strict. In particular, the Law on Tax Administration, Decree 125/2020/ND-CP stipulating penalties for administrative violations on taxes and invoices, and the Penal Code all have very clear regulations on violations and penalties for tax violations in general and VAT in particular. However, the important thing was the implementation in order to achieve even greater efficiency.

In fact, there were places and times when the efficiency of crime detection was not high and not timely. In addition, the attraction of illegal money was so great that it had blinded taxpayers, so the situation of VAT refund fraud has decreased recently but was still quite complicated.

In my opinion, to minimize this fraud, in the future, it is necessary to improve the efficiency of tax inspection and the investigation of the authorities in order to detect and handle resolutely and thoroughly acts of VAT fraud.

Strictly implement solutions to prevent violations in VAT refund Photo: S.T

Besides sanctions via legal policies, what do competent authorities need to do to improve efficiency in detecting and handling this violation?

In my opinion, there are two important things that needed to be implemented to further improve the efficiency of detection and handling. Firstly, management agencies and competent forces needed to improve the effectiveness of detecting fraudulent acts through professional measures on the basis of applying risk management techniques and current information technology performed by a team of officers with integrity and high professional qualifications.

At the same time, management agencies needed to promote, strengthen and innovate in communication on tax so that businesses and people understand tax obligations, understand the consequences of tax violations and VAT legislation. In particular, implementing communication among people so that they could support and actively participate in the fight against tax crimes.