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​Vietnamese Facebook cosmetic queen’s attempt to evade 400k in taxes

Tuesday, December 12, 2017, 15:03 GMT+7
​Vietnamese Facebook cosmetic queen’s attempt to evade 400k in taxes
Two women watch a 'skincare sharing' live video on Facebook. Photo: Tuoi Tre

After reports that a Ho Chi Minh City-based woman had been asked to pay VND9.1 billion (US$400,881) in back tax sparked skepticism, local tax authorities have detailed how an individual can make a fortune through selling cosmetics via Facebook.

The headline-grabbing ‘Facebook seller’ has agreed to pay the back taxes and fines for insufficient tax declarations as well as late payments, but is exempt from further legal penalty.

Her name is therefore not disclosed, and the cosmetic brand that helps her make millions can only be referred to as T.

The tax department in Phu Nhuan District, where her business is registered, had received a tip-off that the woman had been evading taxes and so decided to inspect it.

Tax officials eventually discovered a difference of VND400 billion ($17.62 million) between the revenue she declared for tax payment and her actual income.

This translated to back taxes of VND9.1 billion, including fines imposed.

Multimillion-dollar online business

According to data gathered by Tuoi Tre (Youth) newspaper, the woman currently runs a Facebook profile with more than 56,000 followers and usually promotes whitening cream, weight loss supplements and other beauty care products, via Facebook Live.

In those live-stream broadcasts, the woman provides tips on skincare and how to use her products to a huge audience of 20,000 – 30,000 followers.

The ‘cosmetic boss’ also wholesales her products to hundreds of dealerships in and outside Vietnam and offers training courses for dealers.

A woman shops on Facebook in this photo illustration. Photo: Tuoi Tre
A woman shops on Facebook in this photo illustration. Photo: Tuoi Tre

Dang Khac Phuc, head of the tax inspection team No.1 under the Ho Chi Minh City Tax Department, said the woman previously ran a company headquartered in District 10.

After shutting down that company, she founded in a new one in Phu Nhuan, this time registering it as a household business rather than a corporation.

The owner uses her individual bank account for all business transactions.

Tax authorities were only able to uncover her tax evasion after analyzing bank data.

According to the city’s tax department, the woman made VND120 million ($5,286) in revenue in her first year of operation in 2013.

That figure jumped to VND95 billion ($4.19 million) in 2015, before skyrocketing to VND344 billion ($15.15 million) the following year.

However, the successful Facebook seller would under-declare her earnings in her tax returns.

The Phu Nhuan tax department had decided to transfer the case to police as the woman showed signs of tax evasion, but she immediately cleared all of her arrears and fines.

“We are investigating those who bought products from this woman to see if these secondary sellers had declared and paid taxes or not,” one official from the Phu Nhuan tax department said.

Tougher actions should be considered

As the woman has been able to avoid criminal charges for her alleged tax evading attempt, experts are still concerned about the precedence this sets.

A senior inspector from the General Department of Taxation explained to Tuoi Tre that individuals switching from a corporate business to a household business model is a new kind of tax evasion.

A household business has to pay license, value-added and personal income taxes, whereas a corporate business has to pay many other types of tax.

The corporate income tax is currently set at 20 percent, while personal income tax has a seven-tier range from 5 percent to 35 percent.

According to the Penal Code that took effect in 2016, any attempt to evade taxes from VND300 million ($13,216) to below VND1 billion ($44,053) is subject to a fine of between VND500 million ($22,026) and VND1.5 billion ($66,079), or a prison term of one to three years.

The penalty for tax evasion amounting to VND1 billion and above is VND1.5 billion to VND4.5 billion ($198,238) in fines, or a jail term between two and seven years.

Do Gioan Hao, who teaches tax and customs law at the University of Finance and Marketing, Ho Chi Minh City, hailed the city’s tax authorities for letting the public know about their handling of the case of the Facebook cosmetics seller.

“This raises the alarm for other individuals who sell things online and continue to evade tax,” he said.

However, Hao suggested that authorities consider whether tougher action, like levying criminal charges, should be taken rather than simply requesting payment of the back taxes.

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