Complying With Tax Systems in These Three APAC Countries Is Demanding 1

The TMF Group has chosen 20 countries from the Asia-Pacific (APAC) region for its Financial Complexity Index for 2017.

We’ll take a closer look at the top three systems from the region in this article and also add another dimension to the analysis by looking at the overall and parameter specific performance of these countries in the World Bank’s Doing Business report.


Vietnam has emerged as the country with the most complex tax and accounting system from APAC. Citing foreign nationals, the report says that its regulations on business are “unnecessary and overly burdensome,” due to multiple licensing requirements.

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One of the aspects which make the tax system cumbersome is the increased goals for tax auditing in order to combat tax evasion, which has resulted in higher frequencies of investigations. Apart from regular filings, firms are required to prepare monthly, quarterly, semi-annual and yearly reports.

Further, accounting documents need to be stored for a decade and though English can be used, Vietnamese is mandatory to comply with accounting requirements.

It is little wonder that ‘paying taxes’ is the parameter Vietnam fares the worst on, ranking 167th among 190 nations according to the Doing Business report.

The Complexity Index report mentioned that the government has been revising the Vietnam Accounting Standard and System (VAS) to be in line with the IFRS, among other probable improvements.

The country has been making efforts to diversify its economy and attract foreign investment. An improvement in the tax system will be crucial in doing that.

India and China

We’re jointly looking at the cases of India and China because of the similar problems that they face.

According to the Doing Business report, both fare poorly on ‘dealing with construction permits’ and ‘paying taxes’. In fact, India is the sixth worst in the world when it comes to the former parameter.

While China’s system is burdensome due to the mandatory usage of Chinese language and the usage of the renminbi as the denominated currency, the tax system in India is multi-layered and requires cross-border compliance, with multiple entities administering multiple rates.

Companies in China need to employ the services of a registered tax specialist as VAT invoice purchases can only be done by such an entity. Further, movement of foreign currency is heavily regulated by the State Administration of Foreign Exchange. Annual reports need to be submitted to multiple ministries and authorities.

On the other hand, doing business in India means adhering to the Foreign Exchange Management Act (FEMA), the Income Tax Act, and the tax laws of all states and union territories depending on the size and scope of the business.

For the future, the report noted that China is trying to simplify its VAT rate, and the digitization of the tax compliance system is expected to simplify a lot of administrative hassles currently faced.

Meanwhile, India has already taken a major step to reduce the multiplicity of taxes by introducing the Goods and Services Tax (GST). This ‘one nation, one tax regime’ system is scheduled to come into effect from July 1, 2017.

Given the expected growth of Asia in general and the importance of India and China in particular, it is vital for these countries to simplify doing business in order to entice foreign companies towards their shores.

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