Kenneth Atkinson, chairman of the British Business Group Vietnam, said companies are having to pay late tax payment penalties because the tax office is unable to carry out annual tax inspections in a timely fashion.
"The under resourcing of the tax and customs departments often means that inspections take place late and up to five years after the reporting period," Atkinson said at the recent Vietnam Business Forum (VBF).
"Where there are genuine administrative errors, which are not challenged for up to five years, the administrative fines and late payment penalties are unfair and onerous."
But Deputy Minister of Finance Vu Thi Mai rejected his claim, saying tax officials will make inspections only on companies which show "tax risks".
By risks she was referring to inaccurate tax returns, whether deliberate or unintentional.
"Tax offices’ principle is to carry out tax scrutiny and inspections of all those enterprises that show tax risks," she told the forum.
"Such a mechanism is deployed in advanced countries. So we would like to urge enterprises to update themselves on new policies in time to ensure compliance."
Atkinson said the penalty for late payment is collected at an interest rate of approximately 20 percent per annum, which when calculated for five years more than doubles the original amount due.
"International companies do have a feeling of injustice of being required to pay these fines and penalties when the cause is completely outside of their control having lodged the papers in a correct and timely fashion."
In a paper it presented, the British Business Group Vietnam proposed the creation of an independent body which can hear appeals from taxpayers against fines and penalties.