Shark Binh: Decades of Informal Transactions: A Challenge for Vietnam to Embrace a Culture of Proper Taxation

Social media was abuzz yesterday with an image of a 6,000 VND public urination fee invoice. Notably, the tax accounted for about 7.4% (approximately 444 VND), while the cost of issuing an electronic invoice was as high as 1,000 VND – over 16% of the transaction value.

Regardless of its authenticity, this serves as a classic example of the “new normal” in the business environment: from a bunch of vegetables, a fish to a public toilet – everything requires an invoice and tax compliance.

First and foremost, let’s affirm that this is extremely beneficial for the country. Just like the mantra, “don’t drink and drive,” it’s only natural that if you’re doing business, you must pay taxes.

It will take time for Vietnamese people, who have a long history of informal trading without invoices, to adapt to this “civilized, modern, and fair” way of doing business, ensuring proper and sufficient tax payments. That day will undoubtedly come.

However, regarding tax collection and invoice traceability, I believe the government should consider not applying retroactivity and instead implement a suitable roadmap. This is especially crucial for small-scale businesses, who are already struggling to secure their own livelihoods and contribute to society, to avoid negative reactions like the current en-masse cessation of trading by vendors.

In this article, I want to emphasize the importance of fairness in business, avoiding a “tighten here, loosen there” approach.

In my opinion, the retail industry can be divided into three main blocks, all of which are significantly impacted by Decree 70.

Direct-selling small-scale businesses are experiencing a “triple whammy” this year.

Firstly, they are under immense pressure from the rapid growth of e-commerce, which has significantly reduced their market share. Secondly, the transition from a lump-sum tax to a tax calculation based on revenue has put many businesses at risk of profit decline, forcing them to adjust selling prices and adapt to the tax declaration process and technological requirements. Thirdly, the risk of being penalized for not having input invoices for inventory further worries many businesses, especially in sectors like catering and agriculture, where obtaining invoices is challenging.

The consequences are evident, with numerous small vendors in Hanoi and Ho Chi Minh City temporarily ceasing operations, reflecting their confusion and bewilderment. Or perhaps this is a mild reaction to the sudden implementation of policies without a proper roadmap.

The second group, online sellers, also face significant challenges. The cost of selling goods (transaction fees for e-commerce platforms, advertising and promotions, warehousing, transportation, etc.) is increasing and is predicted to reach 50% of sales revenue, excluding other operating costs (salaries, insurance, office/factory rentals, etc.).

Numerous e-commerce platforms have adjusted their selling fees since February and April 2025. For instance, TikTok Shop increased its commission rate from 3% to 4% for regular sellers and up to 7.7% for brand shops (shop malls).

As a result, online sellers have had to mark up retail prices significantly to make a profit. In the event of retroactivity and tax collection based on a percentage of revenue rather than profit, many online entrepreneurs could go from making a profit to incurring losses once they receive their tax invoice.

However, amidst these challenges, I’ve noticed a new and quietly thriving “force”—cross-border sellers from foreign countries, reaping the benefits without direct competition.

It is estimated that Shopee alone, which holds 70% of the e-commerce market share, has approximately 31,500 cross-border sellers from abroad, in addition to two other foreign e-commerce platforms that together account for 99% of the market share.

Currently, many e-commerce platforms directly distribute cheap goods from abroad, mainly from China, to Vietnamese consumers. With their vast warehouses near the border and a market scale 15 times larger than Vietnam’s, Chinese goods have advantages in terms of price, diversity, and delivery speed.

However, the issue lies in the fact that these cross-border sellers—mainly from China—currently only pay a 10% value-added tax (VAT), which was recently imposed, while not fulfilling many obligations like domestic businesses.

Specifically, imported goods valued below VND 1 million are exempt from import tax, and there are even proposals to raise this threshold to VND 2 million. Moreover, cross-border sellers are not subject to turnover tax or income tax and do not significantly contribute to job creation for local workers, as most logistics operations are handled by enterprises with foreign ownership.

This gives them a significant advantage over domestic goods in the Vietnamese market. Without appropriate policies to balance the playing field, cross-border imports could grow rapidly at a rate of 20-30% annually, outpacing domestic goods and sellers in the next 10-20 years.

If left unchecked, Vietnam risks becoming a “borderless consumer market.”

To ensure fair competition for the e-commerce cross-border selling block, I propose the following policies:

– In addition to the 10% VAT, impose a turnover tax of at least another 10% on the value of cross-border retail orders through e-commerce platforms into Vietnam.

– Lower the value of cross-border orders eligible for import tax exemption from the current VND 1 million to VND 100,000, or even abolish this minimum exemption, as practiced by many developed countries to protect their domestic markets.

– Monitor the outflow of money from e-commerce platforms to supervise taxes and prevent transfer pricing.

– Implement policies to control the fee structure of e-commerce platforms and prioritize Vietnamese sellers (as this is an essential service in the 4.0 era), preventing arbitrary fee increases that squeeze domestic sellers as seen today.

I believe that Vietnam’s small business community always aims to comply with the law and is willing to pay taxes to build the country. However, the business environment needs to ensure fairness so that if domestic enterprises cannot be protected, they will not be overly disadvantaged compared to foreign competitors.