Vietnam accuses Netflix, Apple TV+ of skirting taxes in the country

Credit: Reuters

Vietnam has accused Netflix and Apple of skirting tax responsibilities in the country, claiming that it adds unfair competition for domestic companies.

More specifically, the country's information minister said that streaming companies like Netflix and Apple TV+ have combined revenues of nearly one trillion dong ($43.15 million), but have never paid any taxes in Vietnam, Reuters reported.

"Domestic companies have to abide by tax and content regulations while foreign firms do not, which is unfair competition," Minister Nguyen Manh Hung said during a government meeting.

Those content regulations include rules related to "the history and sovereignty of [Vietnam], violence, drug use, and sex," Hung said. Netflix was told to remove "Full Metal Jacket," a Vietnam war movie, from its catalog in the country, as an example.

Additionally, Vietnam also passed a cybersecurity law in 2018 that requires foreign streams earning money from online activities to store their data locally.

Netflix, in a statement to Reuters, said it has no plans to operate local servers or open offices in Vietnam. It did add that it is supportive of a mechanism that would allow it to pay taxes in Vietnam.

Apple, for its part, is reportedly mulling the creation of a $1 billion data center and R&D facility in the country. The company's Apple TV+ service has been available in Vietnam since its launch on Nov. 1, 2019.

The effort from Vietnam is part of a broader push in Southeast Asia to tax tech giants more. Countries like The Philippines, Thailand, and Indonesia have also recently passed or created legislation that would ensure foreign companies pay tax.

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6 Comments

earthkid

said about 3 years ago

the way I see it, if you don't like it then don't let them do their business in Vietnam. why are you complaining, when they are making your country more civilize.

williamh

said about 3 years ago

earthkid said:

the way I see it, if you don't like it then don't let them do their business in Vietnam. why are you complaining, when they are making your country more civilize.

People and companies are entitled to minimize their taxes however the law permits. They also have to pay the taxes that are due. These companies should price their services with taxes taken into account, and remit the tax owed.

I'm glad that there are people in Vietnam with the money to spend on Netflix and Apple stuff. The country has a very high poverty rate and not very good infrastructure,. Companies paying their taxes will help the government make improvements (hopefully - I also don't have much faith in governments not wasting their resources.)

We haven't heard Apple's or Netflix's side of this. I think they generally operate in good faith with the intent of paying what's due. It may well be that neither company has an operating profit in the country. The fact that they have revenues does not mean that they're making any money out of it.

austriacus

said about 3 years ago

earthkid said:

the way I see it, if you don't like it then don't let them do their business in Vietnam. why are you complaining, when they are making your country more civilize.

Do you really mean to say that TV shows make a country more civilized? I think the problem is that tax rules have not been adjusted enough to prevent abuses (like many multinational paying literally no taxes)

austriacus

said about 3 years ago

williamh said:

earthkid said:

the way I see it, if you don't like it then don't let them do their business in Vietnam. why are you complaining, when they are making your country more civilize.

People and companies are entitled to minimize their taxes however the law permits. They also have to pay the taxes that are due. These companies should price their services with taxes taken into account, and remit the tax owed.

I'm glad that there are people in Vietnam with the money to spend on Netflix and Apple stuff. The country has a very high poverty rate and not very good infrastructure,. Companies paying their taxes will help the government make improvements (hopefully - I also don't have much faith in governments not wasting their resources.)

We haven't heard Apple's or Netflix's side of this. I think they generally operate in good faith with the intent of paying what's due. It may well be that neither company has an operating profit in the country. The fact that they have revenues does not mean that they're making any money out of it.

I would dispute that they operate in "good faith" - this is not heir business purpose. Their fiduciary duty is to maximize shareholder value. This means that they will try any (until now) legal way to reduce their taxes. I obviously have no problem with a non profitable business not paying taxes. But we all know how easy it is to fudge the numbers with transfer pricing and shifting intellectual property around so high tax countries pay high fees reducing their profitability and their tax burden. However, this is all virtual and has no real grounding in reality.

williamh

said about 3 years ago

austriacus said:

williamh said:

We haven't heard Apple's or Netflix's side of this. I think they generally operate in good faith with the intent of paying what's due. It may well be that neither company has an operating profit in the country. The fact that they have revenues does not mean that they're making any money out of it.

I would dispute that they operate in "good faith" - this is not heir business purpose. Their fiduciary duty is to maximize shareholder value. This means that they will try any (until now) legal way to reduce their taxes. I obviously have no problem with a non profitable business not paying taxes. But we all know how easy it is to fudge the numbers with transfer pricing and shifting intellectual property around so high tax countries pay high fees reducing their profitability and their tax burden. However, this is all virtual and has no real grounding in reality.

Apple’s duty to its stockholders doesn’t include breaking the law if they think they can get away with it. Apple’s view seems to be different, just look at all the environmental, social, and other initiatives that in the short run at least, do not maximize profits. If you buy shares of AAPL, you know you’re getting some of that. You’re right about transfer pricing and all that. We don’t really have any of the facts here.

One thing I can tell you from personal knowledge is that many companies price certain things much lower in the developing world to reflect local conditions. That means that in some poor countries, legal DVDs can be quite cheap though still not as cheap as pirated ones. In the former Soviet Union in the 90’s at least, imported tobacco, perfumes, etc could be much much cheaper. (I don’t think that’s true now. And Apple computers cost much more at the same time.) This is what leads to so-called gray market goods and is part of the reason for region coding on DVDs. It would be my guess that Netflix doesn’t cost as much in Vietnam as it does in the US to have enough customers to serve.