16 ministries, sectors and localities have just proposed to increase the personal income tax (PIT) deduction level by one and a half times compared to the current level, on the grounds that the current level is no longer suitable to reality.
The Ministry of Finance has also submitted a proposal to develop a draft Law on Personal Income Tax (replacement). Giao thong Newspaper discussed with Mr. Nguyen Van Duoc, General Director of Trong Tin Accounting and Tax Consulting Company, Standing Member of the Vietnam Tax Consulting Association about this issue.
Mr. Nguyen Van Duoc.
Many regulations are outdated.
What are the biggest shortcomings in the current personal income tax policy, sir?
In my opinion, there are 5 main groups of problems that have revealed shortcomings and been dissected in recent years.
The first problem is that the family deduction is outdated. Since the Personal Income Tax Law took effect, it has been adjusted three times.
2020 was the most recent adjustment, but the current family deduction (VND11 million/month for taxpayers and VND4.4 million/month for dependents) has not kept up with the increase in living standards and inflation.
In particular, the way of constructing the adjustment of the mechanical family deduction level by multiplying the unadjusted family deduction level by the increase in the consumer price index (CPI) makes the law always outdated compared to reality.
The second problem is that the progressive tax structure is not reasonable when there are many levels. The personal income tax system has 7 tax levels, with the distance between the levels not really reasonable.
This could lead to a situation where workers are subject to high taxes when their income increases slightly, failing to mobilize tax revenue from high-income earners.
In addition, the law does not fully cover new sources of income and does not properly regulate the nature of transactions and income.
Revenues from digital assets, financial investments and new business models are not clearly regulated, leading to difficulties in tax management as well as inadequacies in determining fair tax obligations.
Many people think that the regulation of adjusting taxes based on CPI is too rigid. What is your opinion?
That's right. Because adjusting only when the CPI increases by more than 20% can make the policy unable to respond to reality.
Moreover, tax policy has not ensured fairness among income groups, due to the inadequacy of tax calculation methods for some sources of income from financial investment or real estate, which are subject to lower tax rates than income from wages.
What is the appropriate family deduction level?
The Ministry of Finance has submitted a proposal to develop a draft Law on Personal Income Tax (replacement), proposing to consider studying the option of assigning the Government to regulate the family deduction level to ensure flexibility and initiative. Do you think this is reasonable?
I strongly agree with this proposal. The family deduction level needs to be adjusted promptly according to inflation and average income.
Therefore, the family deduction level should still be calculated based mainly on CPI, plus some other macro-economic and social indicators, the key is to accurately reflect the nature of life as well as the income of taxpayers.
Current family deductions have not kept pace with rising living standards and inflation (illustrative photo).
That is, adjust the method and basis for building family deductions to be suitable in the direction of approaching urban living standards, creating benefits for mountainous and rural areas to catch up with the city.
In particular, by amending the CPI regulation, if it changes from 5% to 10%, the Government is allowed to adjust the family deduction level, instead of 20%. This regulation will make the policy more sensitive and more suitable to reality.
In addition, it is necessary to calculate the necessary expenses that taxpayers must spend on education, health care, etc., similar to the charitable and humanitarian contributions that are being deducted.
I think that the appropriate family deduction level could be around 15 - 18 million VND/month. This is also the level that many ministries, branches and localities have proposed.
So what about the progressive tax schedule, how will it need to change, sir?
In fact, compared to many countries in the region, 7 tax rates are considered too complicated, increasing administrative procedures and causing difficulties in calculation.
Besides, the gap between tax brackets does not accurately reflect the actual income of workers.
Furthermore, people with income of about 20 - 30 million VND/month have to pay a tax rate of 20 - 25%, while this is still the middle-income group, not necessarily rich.
In particular, tax brackets have not been adjusted promptly to follow economic fluctuations, leading to a situation where taxpayers easily fall into higher tax brackets just because their salaries increase due to inflation, even though their living standards have not improved.
Therefore, it is necessary to reduce the tax rates from 7 to 5 for easier calculation.
At the same time, adjust the tax rate at lower tax rates more slowly and at higher tax rates more quickly to reduce tax pressure on low-income and middle-income earners while still ensuring budget revenue due to additional revenue from high-income earners.
Don't hesitate any longer.
In your opinion, what are the points that need to be carefully considered to ensure fairness when amending the law?
The law needs to adjust tax calculation methods to suit the nature of income. Only when there is income must tax be paid. The higher the income, the higher the tax.
Therefore, it is necessary to return to the method of calculating tax according to declaration for income from real estate transfer, income from securities and income from capital investment of non-resident individuals, income from business... to ensure that there is no distorting impact on the market from tax policy.
In addition, it is necessary to increase tools to properly and fully control taxpayers' income on all types of income from salaries, wages to business income and other income such as real estate transfer, securities, capital transfer, etc.
Another important point is the need to build modern personal income tax policies and management based on the application of science, technology and artificial intelligence, increasing voluntary compliance with the law.
That is, it is necessary to complete infrastructure, supporting software, regulations, and policies that are consistent, scientific, and in accordance with relevant practices and laws.
The shortcomings have been exposed for a long time, the draft Law on Personal Income Tax will be discussed by the National Assembly at the October 2025 session, if passed at the May 2026 session, it can only be applied in 2027. Is it necessary to have a solution to adjust it soon, sir?
It is very necessary and urgent. To implement it quickly, the Government can submit to the National Assembly to adjust some important regulations such as family deduction levels right in the nearest session with a separate resolution, instead of waiting for the entire law to be passed.
However, the Ministry of Finance has repeatedly argued that the non-adjustment is legal, because the CPI from 2020 to now has not exceeded the 20% threshold.
Furthermore, currently, the deduction for taxpayers is 11 million VND/month, 2.2 times higher than the average income per capita (4.96 million VND/month), while in many countries, this rate is often less than 1 time. What is your opinion?
In fact, from 2020 to the end of 2024, the CPI has increased by nearly 16%. This means that taxpayers are suffering a great loss. Therefore, waiting for the entire law to be passed in 2027 is quite a long time, when the above shortcomings are urgent.
Since 2020, due to the impact of the pandemic, prices of goods, medical and educational costs have increased while workers' salaries have shrunk or increased with inflation, making life increasingly difficult. These shortcomings need to be adjusted soon and should not be allowed to continue any longer.
The law stipulates that the CPI must increase by more than 20% to adjust the deduction level, but reality has proven that this level is no longer appropriate.
Workers, ministries, branches and localities have spoken out in unison, the Ministry of Finance needs to have the fastest solution.
Thank you!
Proposal to increase family deduction level
The Ministry of Finance has just requested the Ministry of Justice to appraise the Government's proposal to draft a replacement Law on Personal Income Tax.
An important content that the Ministry of Finance is orienting to amend and supplement is the progressive tax schedule for income from wages and salaries after 15 years of application.
In the impact assessment report, the Ministry of Finance said that there is a view that the current tax schedule is unreasonable, 7 tax brackets are too many, the gap between brackets is too narrow, leading to a jump in tax brackets when summing income in the year, increasing the amount of tax payable.
According to the Ministry of Finance, 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, Vietnam can study to reduce the number of tax brackets of the current tax bracket from 7 brackets to an appropriate level; along with that, consider widening the income gap in tax brackets, ensuring higher regulation for those with income at high tax brackets.
Commenting on the proposal to develop the draft Law on Personal Income Tax (replacement), many ministries, branches and localities proposed to increase the family deduction level for taxpayers with income from wages and salaries to 18 million VND/month, and for dependents to 8 million VND/month.
At the same time, add deductions to support costs for education, healthcare, housing, voluntary social insurance and investments in human development; add deductions to support special cases such as employees who are single parents or have relatives with serious illnesses...
Source: https://www.baogiaothong.vn/thue-thu-nhap-ca-nhan-loi-thoi-sua-the-nao-192250213215938082.htm
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