Balancing Digital Taxes: How Australia and Viet Nam Modernized VAT for E-Commerce Growth

The Asian Development Bank (ADB), in collaboration with the Organisation for Economic Co-operation and Development (OECD) and the World Bank Group (WBG), has released a Governance Brief by Gary Artuso that explores how Australia and Vietnam have modernized their value-added tax (VAT) and goods and services tax (GST) systems to capture revenue from the booming e-commerce market. Supported by ADB's Domestic Resource Mobilization Trust Fund, the study highlights how both nations adapted international tax standards to strengthen domestic resource mobilization while ensuring fair competition between domestic and foreign digital sellers.

The Digital Tax Dilemma

VAT contributes over 20% of total tax revenue in Asia and the Pacific, yet the rise of e-commerce has disrupted traditional tax collection models. Digital suppliers can now sell across borders without physical presence, making it difficult for tax authorities to track transactions or enforce compliance. The OECD's "destination principle," which taxes consumption where it occurs, is the global standard but remains hard to enforce for cross-border digital supplies. Without reform, governments face revenue losses, unfair competition between domestic and foreign sellers, and unchecked growth in small, unregistered online vendors.

Two Economies, One Challenge

Australia and Vietnam represent contrasting economic realities but share the same tax challenge. Australia's 2024 e-commerce spending reached A$69 billion (about $45 billion), while Vietnam's surged past $25 billion, driven by mobile platforms like Shopee and Lazada. In both, the government acted to tax offshore e-commerce suppliers. Australia's 10% GST applies broadly to digital and non-digital services, while Vietnam imposes a dual levy, 5% VAT and 5% corporate income tax, on foreign digital businesses. Australia exempts professional services that are partly human-delivered, while Vietnam taxes only automated, internet-based services.

Australia's registration threshold for nonresident suppliers is A$75,000, the same as for domestic firms, ensuring consistency and administrative simplicity. Vietnam imposes no threshold, capturing all suppliers but adding compliance complexity. Both countries require major online marketplaces to collect and remit VAT, bringing multinational platforms like Amazon, Alibaba, and TikTok into the tax net.

Designing Simple and Fair Systems

Vietnam's VAT return system is among the most complex in the region. It requires dual reporting of VAT and corporate tax, separate declarations for low-value imports, and acknowledgment of any taxes withheld by Vietnamese partners. Banks and payment intermediaries must also withhold VAT when unregistered foreign sellers receive payments. Though this ensures tax coverage, it creates administrative burdens and risks of both double taxation and evasion.

Australia, in contrast, runs a learner system based on behavioral compliance. The Australian Taxation Office (ATO) uses data sharing under the Multilateral Convention on Mutual Assistance in Tax Matters, behavioral nudges, and targeted audits. It's "mystery shopping," and data-driven reviews ensure offshore sellers comply without overly complex bureaucracy. This strategy, coupled with simplified online registration and quarterly returns, has boosted voluntary compliance while minimizing costs.

Measuring Success in Revenue

Both systems have delivered strong fiscal results. Australia collected A$1.3 billion ($810 million) in GST revenue from nonresident suppliers in 2022–23, with A$750 million ($471 million) from digital products alone. Vietnam, meanwhile, collected D108 trillion ($4.25 billion) from e-commerce in the first 11 months of 2024, including D19.7 trillion from foreign companies such as Google, Meta, Netflix, and TikTok. However, Vietnam's inclusion of B2B transactions in total VAT may overstate its net gains. Australia's 2,300 foreign registrants contrast with Vietnam's 116, suggesting that expanding registration compliance could further increase Vietnam's revenue.

While Vietnam's zero-threshold approach maximizes collection, Australia's A$1,000 de minimis rule for low-value imports prevents customs congestion but forgoes potential revenue. Vietnam abolished its D1 million ($39) import exemption in 2025, aligning itself with European Union practices and ensuring parity between imported and domestic goods.

Toward Smarter Digital Taxation

The brief recommends that developing countries emulate Australia's simplicity and data-driven approach rather than replicate Vietnam's layered system. Simplified reporting, single-tax application, and the use of reverse-charge mechanisms for business-to-business transactions can enhance voluntary compliance and reduce disputes. The OECD also discourages overreliance on banks for tax withholding, citing high costs and limited transaction data. Instead, governments are encouraged to promote transparency, share data internationally, and establish user-friendly portals for non-resident registration.

Ultimately, both Australia and Vietnam showcase the possibilities of modern VAT reform when guided by global cooperation and local adaptation. Their experiences underscore that success in taxing digital trade depends less on complex rules than on accessible systems, clear communication, and international alignment. The ADB brief concludes that effective e-commerce taxation must strike a balance between simplicity and enforcement, ensuring compliance while keeping digital trade frictionless and fair.