In the submission, the Ministry of Finance said that the current Personal Income Tax (PIT) Law was issued in 2007 and has made many important contributions to the management of State budget revenue. However, in practice, the law has revealed certain limitations, which are no longer suitable for the current socio-economic development situation and the international commitments that Vietnam has signed. Therefore, the Ministry proposed to develop a draft Law on Personal Income Tax (replacement).
Notably, the Ministry of Finance proposed to study and adjust the regulations on family deductions for individual taxpayers and dependents to suit the socio-economic development situation in the recent period and development trends. At the same time, it will contribute to reducing the tax burden for taxpayers, continuing to promote the role of personal income tax policy in implementing the goal of income redistribution.
The Ministry of Finance proposes to develop a draft Law on Personal Income Tax (replacement). (Illustration photo)
The Ministry of Finance said that the Personal Income Tax Law (effective from January 1, 2009) stipulates a deduction for taxpayers of VND4 million/month (VND48 million/year); the deduction for each dependent is VND1.6 million/month. The Law amending and supplementing a number of articles of the Personal Income Tax Law No. 26/2012/QH13 (effective from July 1, 2013) stipulates a deduction for taxpayers of VND9 million/month (VND108 million/year); the deduction for each dependent is VND3.6 million/month.
On June 2, 2020, the Standing Committee of the National Assembly issued a Resolution on adjusting the family deduction level of personal income tax (applied from the 2020 tax period). Accordingly, the deduction level for taxpayers is increased to 11 million VND/month (132 million VND/year); the deduction level for each dependent is 4.4 million VND/month. The adjustment to increase the family deduction level of personal income tax has contributed to reducing the obligations of taxpayers, the amount of tax payable will be reduced for all taxpayers currently paying personal income tax.
With the current deduction for the taxpayer himself of 11 million VND/month and for each dependent of 4.4 million VND/month, a person with income from salary and wages of 17 million VND/month (if there is 1 dependent) or 22 million VND/month (if there are 2 dependents) after deducting social insurance, health insurance, unemployment insurance... currently does not have to pay personal income tax.
According to the 2023 Population Living Standards Survey Report of the General Statistics Office (Ministry of Planning and Investment), Vietnam's average monthly income per capita in 2023 (at current prices) is 4.96 million VND and the group of households with the highest income (the group of the richest 20% of the population - group 5) has an average income of 10.86 million VND/month/person. Accordingly, the current deduction for taxpayers (11 million VND/month) is more than 2.21 times higher than the average income per capita (much higher than the common level applied by other countries), equivalent to the average income of the richest 20% of the population.
The Ministry of Finance said that recently, there have been opinions that the family deduction level is still low, but there are also opinions that the current family deduction level is not low when compared to the general level of living standards and income of people today, many workers currently have income that is not yet at the level of having to pay taxes.
In addition, there are also opinions that it is necessary to regulate the family deduction level according to the regional minimum wage level, the family deduction level in urban areas and large cities needs to be higher than in rural and mountainous areas due to higher costs; there are also opinions that there must be a higher tax policy for individuals in urban areas and large cities to limit immigration and migration to large cities...
In essence, the provisions on deductions before calculating tax ensure the principle that individuals must have a certain level of income to meet the essential needs of life such as: food, accommodation, travel, study, medical treatment... Therefore, only income above this threshold must pay tax. The application of deductions also aims to exclude low-income people from paying personal income tax. The level of family deductions for taxpayers and taxpayers' dependents according to the provisions of the law on personal income tax is a specific level according to the general level of society, regardless of whether people have high or low incomes, with different consumption needs.
" For our country, the current family deduction level has been applied since 2020, so it is necessary to review and re-evaluate to propose amendments and supplements suitable to new conditions. The specific family deduction level needs to be carefully studied and calculated, ensuring that it is consistent with price fluctuations as well as the increase in people's living standards in the recent period as well as forecasts for the coming time, while not reducing the role of personal income tax policy in the tax system.
The “too high” deduction level will obscure the role of the personal income tax policy in implementing the functions of this tax (ensuring social equity and income regulation) and will invisibly bring the personal income tax policy back to the “tax policy for high-income earners” as in the previous period. At the same time, it is possible to consider studying the option of assigning the Government to regulate the family deduction level to ensure flexibility and proactive adjustment to suit the reality and requirements of the country's socio-economic development in each period ," the Ministry of Finance emphasized.
Another notable change proposed by the Ministry of Finance is to reduce the number of tax rates in the personal income tax table. Clause 2, Article 22 of the Personal Income Tax Law stipulates a progressive tax rate applicable to income from salaries and wages with 7 tax rates: 5%, 10%, 15%, 20%, 25%, 30% and 35%.
" Through the actual implementation process, there is a view that the current progressive tax schedule is unreasonable, with too many levels and the gap between levels being too narrow, which can easily lead to a jump in tax levels when summing income at the end of the year, increasing the amount of tax payable, and the number of tax settlements increasing unnecessarily while the amount of additional tax payable is not much ," the Ministry of Finance informed.
The general trend that some countries have recently implemented is to simplify the Tax Schedule by reducing the number of tax levels in the tax schedule. Vietnam can study to reduce the number of tax levels in the current Tax Schedule from 7 levels to an appropriate level; along with that, consider widening the income gap in the tax levels, ensuring higher regulation for those with income at high tax levels. Implementing in this direction will contribute to simplifying and reducing the number of tax levels to facilitate tax declaration and payment by taxpayers.
Source: https://vtcnews.vn/de-xuat-sua-luat-thue-tncn-nang-muc-giam-tru-gia-canh-giam-so-bac-bieu-thue-ar909491.html
Comment (0)