Tax evasion, transactions using personal accounts…
Ms. Thuy Linh (District 10, Ho Chi Minh City) said that she recently went to a beauty salon to treat melasma with laser treatment at a cost of more than 5 million VND and bought facial creams for more than 2 million VND. The entire amount was spent in cash and no invoice was issued because she did not need it. If she had an invoice, she would have to pay an additional 10% value added tax. Similarly, Ms. Thanh An's family (District 3, Ho Chi Minh City) often eats out, but some places do not accept credit card payments, only cash or bank transfers. It is worth mentioning that the account number is sometimes said to belong to the restaurant accountant, sometimes to the manager... Thus, the restaurant's revenue will flow into an individual's account instead of the company's account with a registered tax code. The above cases can all become big loopholes that make it difficult for tax authorities to grasp the exact revenue of many businesses. This means that the amount of tax paid will decrease, and losses will increase.
The tax rate of salaried employees is much higher than that of both businesses and individual entrepreneurs.
In addition, personal income tax (PIT) is progressively increased from 5 to 35% while enterprises only pay 20% CIT on profits. Not to mention that individuals are only allowed to deduct "hard" expenses of 11 million VND/month and 4.4 million VND/month for dependents, while enterprises will be allowed to deduct all reasonable and valid expenses before calculating taxes. Therefore, to avoid taxes, many individuals have found ways to set up companies to reduce the amount of tax payable. Ms. Thanh Nhan (District 7, Ho Chi Minh City) is an individual with experience in organizing events. In recent years, during the summer, she was hired by a children's game company to carry out a program with a cost of 500 million VND. Each time she received money, Ms. Nhan had to pay 10% tax, equivalent to 50 million VND. In addition, because she has 2 different sources of income, at the end of the year she has to declare and settle taxes at the tax office herself. With a total annual income of about 1.1 billion VND, Ms. Nhan only gets a personal deduction of 132 million VND, the amount of tax to be paid is 220 million VND. "Actually, the amount of 500 million VND to organize the event seems a lot, but the travel organization is also costly. I also have to hire more people to help, so I have to pay them. But the company pays me, so it is all included in my income and I have to bear all the taxes. Then some friends advised me to open my own company to deduct expenses, so I followed suit, which is much more profitable," Ms. Nhan said, adding that she used the house she was renting as her headquarters, put her relatives on the list of employees, added travel expenses, received guests, and received invoices... As a result, the amount of tax to be paid when separating the 500 million VND through the company is insignificant because the profit is very little after deducting all operating expenses. At the same time, her income at another company last year was only about 600 million VND with tax paid of nearly 80 million VND, much lower than the combined income of both sources before establishing the company.
Missing out on multiple revenue streams
Mr. Nguyen Thai Son, Director of Saigon Tax Consulting Company, said that in reality, many individuals can still avoid taxes by reducing their income, thereby reducing the amount of tax payable. Even for businesses that pay lump-sum taxes, tax authorities still have difficulty managing all of their revenue. Only salaried workers cannot avoid going anywhere, they pay tax on every penny they receive. According to Mr. Son, it is because the personal income tax rate is high that many people want to "avoid". With the current family deduction for taxpayers at 11 million VND/month and only 4.4 million VND/month for dependents, it is very difficult to cover living expenses, especially in expensive cities like Ho Chi Minh City. Not to mention the time when the Personal Income Tax Law was officially applied from 2007, introducing 7 tax rates from 5 - 35%, but the distance between the rates is quite close, from 5 - 20 million VND is a jump, especially the low rates of only 5 million VND have jumped from 5% to 10%, causing more pressure on taxpayers. Therefore, Mr. Son suggested that individuals should be allowed to deduct reasonable and valid expenses, with full invoices and documents before determining taxable income. For example, tuition fees, food, medical treatment, installment payments for house purchases, etc. At this time, individuals will get invoices when purchasing goods and services, from which tax authorities can grasp more of the actual revenue from establishments and business households.
If with an income of 1.5 billion VND/year, a business individual pays tax from 22.5 to 105 million VND per year depending on the business sector with a tax rate of 1.5 to 7%. Meanwhile, if an employee has 1 more dependent, he/she will be entitled to a family deduction of 184.8 million VND in the year, so the taxable income is 1.31 billion VND. The personal income tax that this individual must pay is 342 million VND (28.5 million VND/month x 12 months). Thus, the personal income tax rate on total income is 22.8%. If compared with individuals trading in goods (accounting for the highest proportion in the sectors) who only pay tax at 1.5%, salaried employees are paying 15 times higher taxes.
Lawyer Tran Xoa, Director of Minh Dang Quang Law Firm
Agreeing, Dr. Nguyen Van Thuan, University of Finance and Marketing, also said that the current regulations on personal income tax for salaried employees are unreasonable, especially the family deduction for both the taxpayer and dependents is too low, not enough to ensure the living expenses of many families. Meanwhile, singers, artists, YouTubers, TikTokers can easily set up private companies, thereby declaring more employees and deducting all reasonable and valid expenses, but in fact the revenue also belongs to the individual himself. Therefore, the tax rate paid through the enterprise will be lower than the tax rate that individual salaried employees have to pay annually. Moreover, enterprises will have many ways to allocate costs in the most beneficial way before calculating taxes, so the tax rate is even lower. These are the shortcomings of the tax law, causing frustration for salaried employees for many years. Because of unfair and unreasonable taxes, many people find ways to evade taxes, causing budget losses.
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