Many proposals to amend the Law on Personal Income Tax

(PLVN) - Currently, many opinions proposing to amend the Law on Personal Income Tax (PIT) all agree that it is necessary to change the family deduction level and tax rates. In the latest proposal on amending the Law on PIT of the Ministry of Finance , these issues have been specifically mentioned.

February 11, 2025 06:54

(PLVN) - Currently, many opinions proposing to amend the Law on Personal Income Tax (PIT) all agree that it is necessary to change the family deduction level and tax rates. In the latest proposal on amending the Law on PIT of the Ministry of Finance, these issues have been specifically mentioned.

Will amend and supplement appropriate family deduction levels

In the submission, the Ministry of Finance cited the 2023 Population Living Standards Survey Report of the General Statistics Office ( Ministry of Planning and Investment ) showing that the average income per capita/month in Vietnam 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) has an average income of 10.86 million VND/month/person. Therefore, the Ministry of Finance believes that the current deduction for taxpayers (11 million VND/month) is more than 2.21 times 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.

Tax brackets are very narrow and need to be revised. (Photo: ST)

However, the Ministry also admitted that recently there have been opinions that the family deduction level is still low. In addition, there are also opinions that it is necessary to regulate the family deduction level according to the regional minimum wage, the family deduction level in urban areas and large cities needs to be higher than in rural and mountainous areas due to higher costs.

The Ministry of Finance affirmed that, in essence, the regulations 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 examination and treatment, etc. Therefore, only income above this threshold must pay tax. The application of deductions also aims to exclude low-income earners from paying personal income tax. The family deduction level 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 high or low income earners, with different consumption needs.

The Ministry of Finance also affirmed that the current family deduction level has been applied from 2020 to present, so it is necessary to review and re-evaluate to propose amendments and supplements in accordance with 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. But at the same time, it does not reduce the role of personal income tax policy in the tax system. Because the "too high" deduction level will obscure the role of personal income tax policy in performing the functions of this tax (ensuring social equity and income regulation) and will invisibly bring personal income tax policy back to "tax policy for high-income earners" as in the previous period.

Widening the tax gap in tax brackets

Currently, according to current regulations, the gap between tax brackets is too narrow, taxable income of bracket 1 from 0 - 5 million VND must pay tax at a rate of 5%. Bracket 2 from 5 - 10 million VND must pay tax at a rate of 10%; bracket 3 from 10 - 18 million VND must pay tax at 15%. In addition, experts say that the progressive tax schedule was applied 15 years ago, from 2009, when the basic salary was only 650,000 VND/month. Up to now, the basic salary has increased to 2,340,000 VND/month, which is 3.6 times higher. However, taxable income remains the same, so there needs to be a strong and comprehensive change in taxable income levels.

The Ministry of Finance also said that, 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 is too narrow, easily leading to a jump in tax levels when summing income at the end of the year, increasing the amount of tax payable, the number of tax settlements increases unnecessarily, while the amount of additional tax payable is not much.

Therefore, through reviewing the current tax structure and studying the trend of improving people's living standards in the coming time as well as international experience, the Ministry of Finance believes that it is possible to study to reduce the number of tax levels of the current Tax Table from 7 levels to an appropriate level; Along with that, consider widening the income gap in tax levels, ensuring higher regulation for people with income at high tax levels.

The Ministry affirmed that the amendment of the Personal Income Tax Schedule will be carefully studied and considered and must be consistent with the orientation set out in the Tax System Reform Strategy until 2030, ensuring consistency with the socio -economic context, income and living standards of the people and with international practices, especially with countries with similar conditions, while ensuring the rights of workers, encouraging the development of the labor market in the context of international integration, and ensuring revenue for the state budget.

Source: https://baophapluat.vn/nhieu-de-xuat-sua-doi-luat-thue-thu-nhap-ca-nhan-post539482.html