While Vietnam encourages its citizens to report tax frauds, insignificant rewards for whistleblowers are putting people off risking their job and safety to denounce the dishonest activities.

Earlier this month, the taxman of Ho Chi Minh City announced it had rewarded a local resident VND3 million (US$130) in cash for reporting tax frauds at an electronics chain that led to the collection of over VND148 billion ($6.35 million) worth of fines and tax arrears.

Nguyen Kim, an electronics giant in the southern metropolis, was found to have dodged the payment of personal income tax for its executives and employees by turning their allowances and bonuses into overtime pay.

Under Vietnamese laws, the disparity between overtime pay and regular pay is considered non-taxable income.

In all, Nguyen Kim was made to pay VND104.74 billion ($4.5 million) in personal income tax arrears, a VND19.41 billion ($832,000) fine for administrative violations, and another VND24.18 billion ($1.04 million) penalty for late tax payment, according to the municipal tax department.

The whistleblower, who was not identified by name for privacy and safety reasons, received the monetary reward of $130 and a thank-you letter to acknowledge his “sense of responsibility toward the community”.

Shoppers inside a Nguyen Kim electronics store in Ho Chi Minh City. Photo: Tuoi Tre

After news of the reward were reported in the media this week, many people questioned its value, which is only 0.002 percent of the money collected by authorities thanks to the man’s report.

According to Nguyen Nam Binh, deputy director of the Ho Chi Minh City taxman, the reward is based on a 2016 directive by the General Department of Taxation, which laid out a guideline on rewarding people who report tax frauds.

The guideline dictates that those who provide information to help district-level taxmen collect tax arrears are eligible for rewards worth no more than VND2 million ($85).

For city-level taxmen, the maximum reward value is VND3 million ($130), while the General Department of Taxation can issue rewards worth no more than VND5 million ($215).

Legal experts are now calling on authorities to revise rewards for whistleblowers of tax frauds and adopt a new system where people are rewarded with a percentage of the amount of tax collected thanks to their report, rather than with a fixed amount.

In countries like the U.S., those who report tax frauds are eligible for up to 30 percent the value of collected tax arrears.

“For a regular citizen, $130 might not be enough incentive to make them risk denouncing the dishonest activities,” said Tran Xoa, director of a Ho Chi Minh City-based law firm.

“That’s not to mention whistleblowers are legally accountable for their reports,” he added.

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