INTERNATIONAL TAXATION

Lecture 1
INTRODUCTION TO TAXATION

Lecturer: Dr. Nguyen Thu Hang

Tel.: 0904651868
Email: [email protected]
 HOPING TREE

Expect Target

Aim Dream

Rule Commit

Strength Knowledge Belief Value

 Objectives and learning outcomes

To provide the core knowledge of tax and taxation in Vietnam

and international tax practice (double taxation, price transfer,
global minimum tax, tax commitments in FTAs…)

Teamwork and management skills, leadership (group

formation, group maintenance, team development and
assignment control, assessment of group activities

Ability to research, discover knowledge and consult the

tax case (collect, analyze and process information, think
systematically).
Methods
• Lecture
• Discussion
• Group work & project
• Mentoring &
Coaching
• Expert Sharing
• Tax Office tour
References:
1. Roy Rohatgi (2005) Basix International Taxation, 2nd Edition, Publication Richmond:
Richmond Law & Tax

2. Joseph Isenbergh (2009), International Taxation (Concept and Insight), 3rd Edition,
Foundation Press. USA

• http://www.gdt.gov.vn
• http://stats.oecd.org/
•https://www.oecd.org/en/topics/sub-issues/global-minimum-tax.html
•https://unctad.org/publication/double-taxation-treaties-and-their-implications-investment
• http://www.taxpolicycenter.org
• http://www.taxworld.org/
• http://taxfoundation.org
•https://www.macmap.org/
•https://www.facebook.com/profile.php?id=61560062872012
• Legal documents of taxation in Vietnam
• Vietnam Pocket Tax Book 2020 – 2024 (PwC)
Assessment:
•Attendance & performance: 10% (attendance check
& incentive scores)
•Mid-term: 30% , incentive scores plus
•Final exam: 60%
 Mid-term for tax research (30%)

✓ 3-4 students/group

✓ Topic on taxes, approval on the 2nd lecture

✓ Regulations and Format: Journal of International Economics

and Management (JIEM)
https://jiem.ftu.edu.vn/index.php/jiem

✓ Submit the research paper on the 8th lecture

 Tax news (Optional, Incentive Score)

✓ Showing on tax news at the beginning of the lecture (max in 5

minutes/group)

✓ Topics: tax news, cases… in Vietnam and foreign countries

 Tentative Schedule
1 Introduction & Chapter 1: Introduction to taxation Speed-date and teamup,
choose topic for midterm
2 Chapter 2 - Components of tax law & taxation Midterm topic approval
3 Chapter 3 - Import Export duty
4 Chapter 4 - Excise Tax (Special Consumption Tax)
5 Chapter 5 - Excise Tax (Special Consumption Tax)
6 Chapter 6 - Value Added Tax (VAT)
7 Chapter 6 - Value Added Tax (VAT)
8 Chapter 7– Corporate Income Tax Submit midterm paper
9 Chapter 8 – Personal Income Tax

10 Chapter 9 - Double taxation

11 Chapter 10 - Price Transfer & Global Minimum tax
12 Mid-term Pitching
13 Expert Sharing
14, 15 Exercise and Review
 Chapter 1: Introduction to taxation

01 What is tax?

02
History of taxation

03 Classification of taxes

04 Characteristics of taxes

05
Purpose of tax
01

02
1. What is tax?

03

04

05
“In this world, nothing can be said to be certain,
except death and taxes.”
(Benjamin Franklin)
 1. What is tax?
“…Taxes are unrequited in the sense that
benefits provided by government to
taxpayers are not normally in proportion to
their payments…”

“A tax is a compulsory, unrequited payment to

general government”
(OECD 1996)

“…General government consists of:

- supra-national authorities,
- the central administration and the agencies whose operations are
under its effective control,
- state and local governments and their administrations,
- social security schemes and
- autonomous governmental entities, excluding public enterprises…”
1. What is tax?

A tax is a compulsory levy made by public authorities

for which nothing is received directly in return.
(James and Nobes, 1997)

“…Taxes are, therefore, transfers of money to

the public sector, but they exclude loan
transactions and direct payments for publicly
produced goods and services …”
Taxation

Taxation is the practice of collecting taxes (money) from citizens

The system of compulsory contributions levied by a government or

other qualified body on people, corporations and property in order to
fund public expenditures.

An inherent power of the state to raise income and to demand enforced

contributions for public purposes.
 2. History of tax

2.1. In primitive society

no taxes

2.2. From slavery to

feudalism society non-economic taxes
• The first known system of taxation was in Ancient Egypt around 3000BC-
2800BC in the first dynasty of the Old Kingdom:
❑ During the reign of Egyptian Pharaohs: Scribes as tax collectors
❑ In Biblical times, tax is already prevalent: According to Genesis 47:24
“But when the cop comes in, give a fifth of it to Pharaoh. The other four-fifth
you may keep as seed for the fields and as food for yourselves and your
households and your children”

• In Greece: A tax referred to as Eisphora was imposed only in times of war

• In Athens: A monthly tax called Metoikon was collected to foreigners
Ancient Greek Taxation
• Taxation was used as an emergency power. Additional resources gained
from war were used to refund tax previously collected from the people
Earliest taxes in Rome
• Taxes known as Portoria were customs duties on imports and exports
• Augustus Caesar introduced the inheritance tax to provide retirement funds
for the military. The tax was 5% on all inheritances except gifts to children
and spouses
In England
• Taxes were first used as an emergency measure
• Taxes on income or capital were a recent development as a result of
increasing government intervention in the economy
2.3. From capitalism to modern industrial period:
taxes based on economy, considering equity
- State has large intervention role in the economy, thus, requires larger budget ->
the tax system is more diversified and complicated in terms of tax kinds and rates
Investment in the construction of economic infrastructure (roads, electricity,
drainage, information systems, ...)

Investment in building social infrastructure (schools, health centers, kitten,

center for disabilities, orphans, ...)

Finance /Equity in State enterprises

Support for private companies

- Democracy leads to equity embedded in tax policy

- Social equity
- does not restrict wills of the rich
- increases of total national income
Why is tax a most important source of State budget?

3 main sources of revenue for State budget:

Volunteering

Borrowing State Budget

Taxing
 3. Classification of taxes

The classification by nominal source of taxation: i.e. by the way

of collecting taxes:

• Any levy that is both imposed and collected on a specific

group of people or organizations;
Direct tax
• For example: income tax, corporate income tax

• Collected from someone or some organization other than

the person or entity that would normally be responsible
Indirect tax for the taxes
• For example: sales tax, value added tax, excise tax
 Compare between Direct & Indirect taxes
Direct Tax Indirect tax

• Some examples: income tax, corporate • Some examples: sales tax, excise duty,
tax, wealth tax, gift tax, expenditure tax VAT, service tax, entertainment tax,
etc. custom duty etc.
• cannot be transferred or shifted to • can be shifted to another person
another person

• Not included in the price • included in the price, but not always
visible on a bill;
• can depend on individual circumstances; • cannot depend on individual
circumstances; can depend on the object
you buy.
• Lack of administration in collection can • Hard to be evaded as the taxes are
make tax evasion possible charged on goods and services.
 Direct Tax Indirect tax
• help in reducing inequalities and are • May enhance inequalities and are considered
considered to be progressive to be regressive.
• have many exemptions and involve higher • involve lesser administrative costs due to
administrative costs convenient and stable collections
• are collected only from people in respective • have a wider coverage as all members of the
tax brackets. society are taxed through the sale of goods
and services

• Additional indirect taxes levied on harmful

commodities such as cigarettes, alcohol etc.
dissuades over-consumption, thereby helping
the country in a social context
 3. Classification of taxes

By the authority imposing and collecting taxes:

• Central taxes
• Regional taxes
• Local taxes;
 4. Characteristics of tax
Tax collection is performed by a government agency:
Revenue Agency (Canada),
Internal Revenue Service (USA)
Her Majesty's Revenue and Customs (UK)
General Department of Taxation (Vietnam)
….
Compulsory
regulated by laws
tax evasion is punishable
Indirect remuneration
used to finance public goods and services received remuneration does not
depend on tax payment (unrequited payment).
5. Purposes of tax
(Evolution of taxation)

(1) Source of state budget

(2) Market failure → government intervention

-> Stabilization

(3) Redistribution of income -> Equity

 (1) Source of state budget
Proportion of tax revenue in total state budget revenue in some
countries 2008 – 2012 (%)

Country 2008 2009 2010 2011 2012

India 82,1 79,7 72,3 83,8 85,1

Australia 93,2 91,7 93,3 94,1 93,4

Canada 85,7 84,7 85,1 84,3 -

Vietnam 88,5 88,7 90,2 90,4 91,0

USA 73,9 68,9 70,8 75,4 76,8

Japan 38,4 34,9 39,4 44,3 46,9

Source: Compiled from National Budget data (2008 – 2012)

Is Vietnam’s tax burden higher than other countries’?

 The share of tax revenue in GDP structure in
some countries in the period 2015 - 2019

Country 2015 2016 2017 2018 2019

UK 32.44 32.64 32.83 32.89 32.98
Korea 23.74 24.75 25.36 26.75 27.38
US 26.18 25.81 26.74 24.41 24.47
Italy 42.96 42.24 41.91 41.87 42.45
Japan 30.69 30.73 31.38 32.03 -
Norway 38.42 38.88 38.78 39.57 39.93
France 45.28 45.37 46.07 45.93 45.40
Vietnam 19.0 17.9 18.3 18.5 18.6

Source: Total Tax Revenue (OECD 2020),

Contribution of tax revenue to gross domestic product (GDP) in Vietnam (Statista 2020)

TS. Nguyễn Thu Hằng

(2) Stabilisation

Profit Supply - Production

Price Indirect Taxes

Direct taxes

Income Demand - Consumption

 Tax and economic growth

Keynesian economics:
• during a recession: tax should be reduced,
• when there is abundant demand-side growth: The government
would raise taxes to cool the economy and prevent inflation
Case of US:
• Bill Clinton and George Bush (father)’s government (early
1990s): strong economic growth -> tax increased
• George Bush (son): recession > cutting taxes
Case of Vietnam:
• Covid-19 & economic slowdown: VAT tax cut, extension of tax
payment time for CIT, VAT…
 Case of Japan: consumer tax/sales tax

• the sales tax was first introduced in 1989 at a rate of 3%.

1989

• consumer tax increased from 3% to 5% (to recover from Asian financial crisis) -> Japan
1997 fell into recession, but not too long

• consumer tax increased from 5% to 8% (to curb public debt, which accounted for 230%
GDP).
04/2014 • resulted in steep downturn in the economy for two quarters

• the rise in the sales tax from 8% to 10% was initially meant to take place in October 2015,
October but it was then moved to April 2017
2015

• it has been pushed back even further

10/2019
 (3) Redistribution of income -> equity

• How is difference between equity and equality

in tax policy?
(3) Redistribution of income -> equity
 Equity

https://www.youtube.com/watch?v=S6HEH23W_bM

Tom Dick Harry

Equity

Vertical equity
• The taxes paid increase with the amount of earned income
taxes earned income

• The consideration of the extent to which individuals in

different economic circumstance should be treated
differently.

Horizontal equity
• Individuals should pay the same amount in taxes
• The similar treatment of individuals in similar economic
circumstances.

https://www.youtube.com/watch?v=S6HEH23W_bM
Tax under WTO and equity

Taxes become important issues in the regional and global Free Trade
Agreement: 7 negotiation rounds of the GATT/WTO and particularly
the Uruguay Round;

Taxes become the main tool for regulating trade between countries:
the reduction of non-tariff measures;

In addition, to ensure fairness and equity in international trade, the

GATT/WTO has very specific rules to apply anti-dumping duty, anti-
subsidy/ countervailing duty, safeguard measures
Nghệ thuật của việc đánh thuế
cũng như nhổ lông ngỗng, làm
thế nào để có thể nhổ được
lượng lông ngỗng nhiều nhất
với tiếng kêu ít nhất
(Jean B.Colbert)
“A society which turns so many of its best and brightest into
tax lawyers may be doing something wrong”

“Một xã hội có quá nhiều những người giỏi và thông minh

nhất làm nghề luật sư thuế thì có lẽ điều gì đó đã sai”

(Hoffman F.Fuller)
More Reading:

By Åsa Johansson, Christopher Heady, Jens Arnold, Bert Brys and Laura Vartia,
TAX AND ECONOMIC GROWTH, Economics Department working paper
no.620, OECD, 2008 (p8-10)

✓ Tax – labor utilization

✓ Tax – investment
✓ Tax – Productivity
Bardopoulos, AM., Ecommerce and the Effects of Technology on taxation,
Chapter 2: History of Tax, Springer, 2015
✓ Which tax has longest history?
✓ Why does VAT rise?
IMF, Spreading the Wealth,
https://www.imf.org/external/pubs/ft/fandd/2018/03/bourguignon.htm