Despite huge revenues, Facebook and Google pay tiny tax in Vietnam

Despite making billions of dollars in revenue, two giant technology brands Facebook and Google only paid miniscule taxes to the Vietnamese government.

Billions of dollars of revenue in this year’s first quarter

Facebook and Google’s revenue in this year’s first quarter increased sharply, despite being heavily affected by the scandals of data leakage at Facebook (late March) and YouTube (early April).

Google’s parent company Alphabet Inc.’s latest financial report stated that thanks to strong advertisement sales, Google’s profit in this year’s first quarter reached $9.4 billion, exceeding the $5.6 billion in the corresponding period last year.

Google’s first quarter revenue increased by 26 per cent, equaling $31 billion, including $26.6 billion in revenue from advertisements.

In addition, Alphabet has also benefited from the US tax reforms. Accordingly, instead of last year’s 20 per cent corporate income tax rate, this year’s rate dropped to 11 per cent.

Facebook in late April also announced its first quarter results. Specifically, Facebook’s total revenue in this quarter hit $12 billion, up 50 per cent on-year, thanks to advertisement sales.

Furthermore, despite being strongly affected by the March scandal of data leakage, 1.45 billion logged in to Facebook per day and 2.2 billion per month, up 13 per cent year-on-year.

Paying chump change in Vietnam

Slapping tax charges on Facebook and Google has been a difficulty for Vietnamese authorities in the past many years as the two technology companies have not established representative offices and branches in Vietnam.

According to the Ministry of Finance (MoF)’s report, in 2016-2017, Facebook and Google only paid VND120 billion ($5.28 million) in taxes in Vietnam via their partners, including advertising agencies and Vietnamese businesses directly purchasing their services.

The report stated that in 2016, domestic companies on behalf of Facebook and Google paid nearly VND46.9 billion ($2 million) in taxes, including value added tax (VAT) of VND25.3 billion ($1.1 million) and corporate income tax of VND21.6 billion ($951,541).

In 2017’s first nine months, these companies paid taxes of VND73.2 billion ($3.22 million), including VAT of VND39.1 billion ($1.72 million) and corporate income tax of VND34.1 billion ($1.5 million).

According to newswire doisongphapluat.com, one financial expert said that if MoF collected enough taxes via the two corporations’ partners in Vietnam, the state budget would be extended by thousands of billions of VND.

It seems that both Facebook and Google keep purposely forgetting their tax obligations in Vietnam. For instance, Google has employees in Vietnam, but maintains its representative office in Singapore, so they do not have to pay corporate income or personal income tax in Vietnam or social insurance for their employees in Vietnam. Therefore, they can easily afford paying their employees higher salaries.

Vo Do Thang, director of Athena Network Security Training Centre, said that cross-border technology companies do not want to be bound by Vietnamese law, so they do not establish any representative offices or branches in Vietnam. They only maintain a small personnel in Vietnam to communicate and provide information. Therefore, collecting taxes from them is really difficult.

Facebook and Google commonly use international credit cards to pay tax, causing difficulties for Vietnamese tax authorities to control and identify tax payers.

Furthermore, these companies are also researching cross-borders payment methods. For instance, Facebook has applied the Paypal payment system, which is an online payments system. Accordingly, consumers could easily buy Facebook’s advertisements by only paying fees for providers without having to pay tax.

By: Van Anh (VIR)