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Vietnam’s tax plan on Uber ineffective: experts

Wednesday, June 15, 2016, 20:09 GMT+7

The guidance on how Uber must fulfill its tax responsibility for operations in Vietnam is said by experts to be feeble, and ultimately add nothing to state coffers.

Uber, a smartphone app allowing people to hail a private car, has been around in Vietnam since June 2014.  

While it is mostly loved by passengers, it is universally loathed by traditional cab operators.

Uber contracts local car owners to become one of its drivers. Uber drivers use their own vehicles and only have to share 20 percent of each ride’s fare with the company, with the remaining 80 percent going to their own pockets.

The ride-sharing app has also raised concern over its legality and tax obligations, with its operations in Vietnam managed by its parent firm, Dutch-based Uber B.V., rather than any legal entity in the Southeast Asian country.

The General Department of Taxation under the Ministry of Finance has recently issued a document, specifying the taxpaying rules for Uber and its drivers.

According to the taxman, Uber in Vietnam is engaged in “using technology solutions to connect transportation,” rather than “transportation,” which is significant in determining how it must pay taxes.

The classification means Uber will only have to declare and pay taxes on the 20 percent share it receives from drivers. Were Uber to be classified as a transportation firm, it would have to declare and pay taxes on 100 percent of its revenue.

But as Uber has no representative in Vietnam, the General Department of Taxation has stipulated that the company’s Vietnamese partners claim corporate tax and value-added tax deductions, and pay those taxes, on behalf of Uber.

This means before giving Uber the 20 percent share of revenue, drivers must set aside a sum to pay taxes for the company. The Vietnamese partners, however, still have to fulfill tax duties for their 80 percent share.

Such a tax plan has been strongly criticized by experts as ineffective and unreasonable.

A seasoned tax expert, speaking to Tuoi Tre (Youth) newspaper on condition of anonymity, said Uber should be classified as a transportation firm, rather than a transport tech provider.

“Uber is really operating as a transportation company: when a passenger pays, all of the money goes directly to the account of Uber in the Netherlands and the company only pays the 80 share to its drivers later,” he elaborated.

The expert therefore said it is illogical to ask drivers to fulfill Uber’s tax responsibility on the company’s behalf.

“Drivers may fail to fulfill their own [tax] responsibility, let alone do so for Uber,” he said.

According to Vietnamese tax law, the entity that directly receives payment from customers and later pays its partners is responsible for declaring and paying taxes.

“Obviously, Uber collects directly fare payments from customers and only pay its drivers back later, so the company must do the tax declaration and payment tasks, not the drivers,” the tax expert said.

He added that it represents a vague operation and avoidance of the law when Uber gets all the money in the first place despite having no physical entity in Vietnam.

“We cannot pass the tax responsibility to drivers,” he said.

“Uber is bringing convenience to local passengers, a fact that cannot be denied, but it has to comply with the law to create fairness for other Vietnamese transportation firms.”

Local taxi drivers have repeatedly decried the unhealthy competition brought by Uber, mostly because rides hailed via the app are much cheaper.

Not having to pay taxes is apparently the main factor allowing Uber to win over customers with attractive fares. But taxi operators also point to other reasons, such as the huge amount of fees and expenses conventional transportation companies have to cover.

In the meantime, Grab, another ride-hailing app directly challenging Uber in Vietnam, claims it fulfills all tax responsibility.

Grab also shares its revenue with drivers on a 20-80 percent basis, and as a registered business in Vietnam, the company declares and pays taxes for the 20 percent share it receives.

Its drivers pay a fixed tax of 4.5 percent of their 80 percent share.

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