The strong development of the digital economy, e-commerce, cashless payments and cross-border business models is posing unprecedented challenges to tax administration. Meanwhile, the requirements to improve the investment environment, protect property rights and ensure people's privacy are increasingly raised. This makes modern tax management no longer just a problem of collecting correctly and sufficiently for the state budget, but has become part of the strategy to improve national competitiveness.
One of the notable contents of the Draft is the mechanism for disclosing information on violating taxpayers.
In this context, the Draft Decree amending and supplementing a number of articles of Decree 126/2020/ND-CP guiding the Law on Tax Administration 2025[1] (Draft) shows the determination of management agencies in modernizing the tax system and strengthening data-based management. However, in order to fully meet the requirements of the new development period, some contents of the Draft still need to be completed in a more balanced direction between the efficiency of state management and the legitimate rights and interests of taxpayers.
Disclosure of taxpayer information: transparent but fair
One of the notable contents of the Draft is the mechanism for disclosing information on violating taxpayers. In principle, it is a management tool used by many countries to enhance compliance and improve the transparency of the tax system.
In South Korea, the national tax agency publicizes a list of individuals and businesses that owe large taxes for a long time after going through the verification, notification and accountability process. In Australia, the Australian Taxation Authority (ATO) also applies a disclosure mechanism to some large business groups, but it is mainly intended to serve the goal of transparency of the tax system rather than creating social pressure on taxpayers. Meanwhile, many European countries apply a very cautious principle due to the strict standards of personal data protection under the GDPR.
The common point of these models is that the disclosure is usually only carried out after the taxpayer has been fully guaranteed the right to explain, complain or have the final conclusion of the competent authority.
The draft has not yet established a mechanism for suspending public disclosure while taxpayers are exercising their right to explain or complain. This can lead to the risk of a business being severely affected in terms of reputation and business operations before a final conclusion on the violation is reached.
In addition, the Draft also does not clearly classify the level of violation to apply the corresponding forms of publicity. A case of late filing due to a technical error may be placed in the same category as intentional tax evasion. This reduces the proportionality of the regulatory measure and may affect taxpayers' confidence in the regulator.
Another issue that needs to be taken care of is the protection of personal data. As data is increasingly connected and shared widely, the partial disclosure of identifying information does not mean completely eliminating the risk of information leakage. Experience from the European Union shows that the principle of data minimization should be applied in all information processing activities of state agencies, including tax administration activities.
Postponement of exit due to tax debt: need to be approached based on the level of risk
The draft proposes to apply the tax debt threshold of one million VND to consider applying the measure of temporary suspension of exit in some cases. Compared to current regulations, this is a step forward to increase the transparency and predictability of the law.
However, international experience shows that countries often do not focus on an absolute threshold of value, but adopt a risk-based management approach.
In the United States, the restriction on the issuance or renewal of a passport due to tax debt applies only to serious tax debts that have been confirmed and exceed the very high threshold required by federal law. Before applying this measure, taxpayers are notified several times and have the opportunity to settle or complain about the debt.
In Canada and Australia, tax authorities also prioritize financial enforcement measures or payment agreements before considering measures that are likely to directly affect freedom of movement.
This reflects the general principle that the restriction of citizenship should only be used as a last resort in cases where there is a real risk of loss of tax revenue.
Therefore, instead of focusing only on the tax debt threshold, the Draft should develop an assessment mechanism based on many criteria such as the duration of tax debt, the level of cooperation of taxpayers, the number of times that have been warned, the ability to disperse assets or signs of deliberate evasion of tax obligations. At the same time, it is necessary to establish an effective electronic warning mechanism so that taxpayers have the opportunity to overcome before applying measures to restrict benefits.
Taxation of stock dividends: it is necessary to respect the principle of real income
Another content that is receiving a lot of attention is the proposal to deduct personal income tax at the time of distribution of stock dividends.
In terms of economic nature, stock dividends do not generate actual cash flow for shareholders at the time of distribution. The investment value of shareholders still depends on the ability to transfer shares in the future and market movements.
In many countries with developed capital markets such as Singapore, the UK or Australia, tax liability is often tied to the time when the taxpayer actually realises an economic benefit or receives monetary income. This approach reflects the principle of taxation on real income and limits liquidity pressure on investors.
If the tax liability arises at the time of the stock dividend, the investor may be required to pay taxes before any financial benefit is realized. Not only affecting investors, this regulation can also reduce the attractiveness of the form of reinvestment through stock dividends and affect the ability of enterprises to retain capital for production and business.
In the context that Vietnam is striving to upgrade the stock market and attract long-term investment inflows, the design of tax policies needs to be carefully considered to avoid creating unfavorable signals for the capital market.
Source: Economic and Financial Magazine
Risk management and data sharing: the foundation of modern tax management
Perhaps the most important reform point of the Draft lies in the orientation of building a data-based tax management model and risk management.
This is a trend that is being widely recommended by the OECD. Instead of comprehensive and widespread audits, modern tax authorities focus resources on high-risk taxpayer groups based on big data analytics, artificial intelligence, and compliance behavior assessment tools.
Singapore is a good example. The Inland Revenue Authority of Singapore (IRAS) has built a near-fully digitized tax management ecosystem, enabling data sharing between government agencies and businesses in a highly automated manner. However, accompanying this process are strict standards for information security, accountability, and data access control.
Similarly, in Australia and New Zealand, the data connection between tax authorities and banks, financial institutions and digital platforms is always accompanied by clear regulations on the responsibilities of each subject when a data incident or breach occurs.
Meanwhile, the Draft currently does not clarify the responsibilities of stakeholders when system errors arise, false information provision or data leakage incidents occur. This is a gap that needs to be further improved, especially in the context that Vietnam has promulgated the Data Law and specialized regulations on personal data protection.
Tax administration reform needs to be aimed at building trust
International practice shows that successful modern tax systems rely not only on the coercive power of tax authorities but also on the level of trust between the State and taxpayers. The OECD has repeatedly emphasized that effective tax management must be built on three pillars: data-driven management, risk-based management, and voluntary compliance-based management.
The draft Decree has shown the regulator's strong reform determination in modernizing the tax system. However, in order to fully meet the requirements of the new development period, the reform process needs to continue to be completed in a more balanced way between the requirements of state management and the legitimate interests of taxpayers.
A modern tax system must not only ensure correct and sufficient revenue for the state budget but also contribute to building a transparent, stable and highly predictable investment environment. This is an important foundation to improve national competitiveness, strengthen the trust of the business community and create a driving force for sustainable economic growth in the long term.
