Vietnam Defends Uber’s 2 Percent Tax, Rejects Taxi Complaints

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By Lien Hoang

Uber’s travails in the U.S. and Europe haven’t followed the company to Vietnam, where the government has defended the company and rejected a plea from taxi companies for lower taxes to compete with their American rival.

Uber and Grab, a taxi app maker from Malaysia, pay the correct rates of 2 percent corporate tax and 3 percent value-added tax as foreign contractors, according to a July 17 post on the government website. The post dismissed “opinions that the tax policy toward Uber and Grab transportation businesses has not ensured fairness and equality with traditional taxi companies,” which owe 10 percent VAT and 20 percent corporate taxes.

The clashes can spill out onto the streets of Vietnam, where violence periodically erupts between drivers from competing sides. But in meeting rooms, the cabs and ride-sharing services clash by the numbers. Taxi firms want Hanoi to tax 100 percent of Grab and Uber’s revenues, instead of just the 20 percent rate shuffled to headquarters (Singapore for Grab, Amsterdam for San Francisco-based Uber, whose profits are booked through the Netherlands). The remaining 80 percent that goes to drivers is then taxed as personal income. For that reason, the cabs’ request would “result in overlapping and unreasonable taxation,” the government post said.

Taxing Profits Versus Revenue

The government also cast off a request for reduced taxes as “unwarranted.”

“Some traditional taxi enterprises recommend using the corporate tax calculations as instructed for Uber and Grab, or allowing traditional taxis to pay VAT of 5 percent instead of 10 percent,” the post said.

The government noted that cab companies write off business expenses as VAT inputs. They’re taxed on profits, while the app makers are taxed on revenues, said Nguyen Hung Du, a tax partner at Grant Thornton LLP in Ho Chi Minh City.

“The business model of Grab and Uber is different to taxis,” he told Bloomberg BNA in an Aug. 3 email.

Grab has been “working closely” with Vietnam’s tax department and following regulations “strictly,” said Nguyen Thu An, Grab public relations manager.

“The tax policy has been applied consistently and fairly among different types of enterprises,” Thu An told Bloomberg BNA by email Aug. 3.

A spokeswoman for Uber Technologies Inc. declined to comment when reached by phone Aug. 7.

Tech Startups

Robert Vong, a serial entrepreneur in Ho Chi Minh City, said the tax tiff underlies the government’s adjustment to new technologies in Vietnam, where drivers in Grab green and Uber blue jackets now appear alongside the car-door logos of Vietnamese cabs. He hopes authorities can find a way to use technology to deal with startups disrupting older industries, as smartphone apps have done to transportation.

“In this shakeup, drivers and consumers win. Taxi companies lose, unfortunately,” Vong, co-founder of BlockFin Asia, told Bloomberg BNA in an Aug. 4 email. “This presents regulators with the challenge of balancing tax revenue considerations with progress and fairness.”

He cited as potential inspiration a case in Australia, which was struggling to tax online sellers who use eBay. Canberra eventually worked with the San Jose-based company to report sales over a certain threshold that could then be subject to personal income taxes.

To contact the reporter on this story: Lien Hoang in Ho Chi Minh City at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj in London at psukhraj@bna.com

For More Information

The Vietnamese government post explaining transportation taxes, in Vietnamese, is at http://baochinhphu.vn/Tai-chinh/Bo-Tai-chinh-tra-loi-ve-chinh-sach-thue-giua-Grab-Uber-voi-taxi-truyen-thong/311510.vgp

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