Comprehensive Plan Needed to Implement Personal Income Tax

One new point in the draft is that household businesses will have to pay personal income tax instead of the current corporate income tax. In which, family condition is not a consideration for tax payment. The estimated tax will be between 5 per cent and 35 per cent, instead of the current level of between 10 per cent and 40 per cent. Interest from savings deposits will also be subject to tax.

 

Policy makers argued that the law on personal income tax is now a popular trend. At present, more than 180 countries apply such laws, in which personal income tax accounts for 30 to 40 per cent of total state budget revenue in countries such as the U.S., Japan, the UK, France and Germany. The figure is between 13 and 14 per cent in ASEAN countries such as Thailand, Malaysia and the Philippines. Meanwhile, in Vietnam, personal income tax on high-income people accounts for only 2.5 per cent of total state revenue. Policy makers forecast that personal income will be diversified and higher in the coming years. A personal income tax law loosely combining the three systems mentioned will enhance the regulation of the macro economy and society, while raising the state budget.

 

Associate Professor-Doctor Nguyen Khac Minh, director of the Netherlands Master Project at Hanoi Economics University, said the transformation of corporate income tax of household businesses to personal income tax will reduce tax revenue by VND400 billion, or nearly 10 per cent, as the new tax law will bring many opportunities for tax evasion. He also said the latent economy accounts for up to 40 per cent of GDP. This is a large amount of income the government can not control. On the other hand, the verification of personal income of citizens is rather difficult. With the current basic salary level, the number of state officials and workers having stated salary over VND5 million per month is low, while their real income is much higher.

 

Ms Thanh Lan in Hanoi argued that it is necessary for the state to impose tax on high-income persons in society, but the kind of income subject to tax and the initial tax level should depend on the situation in Vietnam. She added that the initial level for personal income tax in Vietnam should be at VND10 million or more. Because, in Hanoi, a household with income of VND5 million per month still faces difficulty. She also said the government should not impose tax on interest from saving deposits, dividend and yield from shares or bonds, because this income is unusual and high risk.

 

Mr Nguyen Duc Thuan at 18T1/1705 Trung Hoa-Nhan Chinh shared the same opinion, saying that personal income tax will narrow the gap between the rich and the poor. In his knowledge, the wide gap between the rich and the poor creates an implicit risk of social instability.

 

Nguyen Thanh Long agreed that income of VND10 million must be taxed. At the same time, the state should have proper methods to encourage the people to self pay tax to contribute to building the country, and should honour citizens for tax payment.

 

According to an online survey, most Vietnamese citizens realised that imposing personal income tax on high-income persons is the right policy. However, their suggestions for the draft personal income tax law focus on: the initial level to impose tax, the implementation of a flat rate or at what level a progressive rate should be applied, and whether or not to impose tax on savings deposits.

Ms Hoa Ngoc Ha at No.132 Ong Ich Khiem, District 11, Ho Chi Minh City, also said that collecting personal income tax is very necessary, but the law is still inadequate.

 

One of the most important elements in applying the new law is making it easy to understand and apply. In Ha’s opinion, exclusion of family conditions will create difficulties for determining tax subjects, and will be a loophole. Applying personal income tax is a growing trend; however, the application of the law in Vietnam requires consistent policies. Economic transparency, expanding financial transaction systems and improving the government’s economic management ability are prerequisites. As a result, in the National Assembly meeting representatives from Bac Giang, Can Tho and Binh Phuoc Province said this law is highly sensitive and complicated, and requires time for research and discussion, so the law should not be approved in this session.