The highest personal income tax rate should be only 25%.

Lower the maximum tax rate from 35% to 25%

In the latest draft of the Law on Personal Income Tax (amended), the Ministry of Finance submitted to the Government option 2, which is to propose a minimum tax rate of 5% corresponding to taxable income in a month of 10 million VND (after deducting family circumstances and other taxable expenses). The maximum tax rate is 35% for taxable income over 100 million VND/month. The progressive tax rate is shortened from 7 levels to 5 levels.

According to the calculation of the Ministry of Finance, when adjusting the tax schedule according to the above plan, the budget revenue reduction is 8,740 billion VND.

Tax rates according to current regulations and proposed adjustments of the Ministry of Finance.

Sharing with VietNamNet reporter , Associate Professor Dr. Pham Manh Hung, Deputy Director of the Institute of Banking Science Research, Banking Academy, assessed that reducing the number of levels from 7 to 5 helps simplify the tax system, while reducing the "jump" at the middle thresholds.

The threshold for the highest tax rate has also been raised from over VND80 million to VND100 million/month, meaning that only the very high income group will be subject to the 35% rate. This is considered an improvement friendly to investors and skilled workers, as the number of people falling into the highest tax bracket has been reduced.

However, according to Mr. Hung, the 35% cap is still significantly higher than in competitive human resource centers such as Singapore (the current highest rate is 24% for residents, with many incentives and deductions). Therefore, with very high salary packages, the marginal tax rate can affect the ability to attract and retain senior staff.

The expert suggested a solution, possibly raising the 35% tax threshold higher than the 100 million VND mark or expanding targeted deduction and incentive policies (R&D, technology experts, green finance) to increase competitiveness compared to regional centers.

Among the comments on the draft Law on Personal Income Tax (amended) announced by the Ministry of Finance, there is a proposal to continue lowering the maximum tax rate from 35% to 25%, while widening the gap between levels and adjusting the tax threshold.

Specifically, the National Assembly Delegation of Nghe An province agreed to stipulate 5 tax rates as in option 2, but proposed to study reducing tax rates at each level to ensure the highest rate is 25% to encourage and motivate taxpayers.

Meanwhile, the National Assembly delegation of Son La province proposed to continue reviewing and assessing the impact of each progressive rate, especially the two tax rates of 30% and 35%. The delegates said that this is a fairly high rate after deducting family circumstances, and it is necessary to assess the impact on taxpayers' income and behavior to minimize tax evasion and avoidance.

Some opinions suggest that the highest personal income tax rate should be only 25%. Photo: Nam Khanh

The Ho Chi Minh City Tax Consultants and Tax Agents Association said that most opinions agreed and suggested removing the 35% tax rate and keeping the tax rate at 30% or lower to create a competitive advantage in the working environment, attracting and retaining talent.

At the same time, encourage and motivate legitimate enrichment, limit fraud and transfer pricing, and increase the ability to attract foreign workers.

Regarding tax rates, the Ho Chi Minh City Tax Consultants and Tax Agents Association agrees with option 2 as proposed by the Ministry of Finance, but it is necessary to adjust the gap wider at rates 1 and 2, increasing by 10-15 million VND compared to the draft.

Proposal to raise taxable income level

Notably, Deloitte Vietnam Tax Consulting Co., Ltd. said that Vietnam's current tax schedule is among the countries with high personal income tax rates compared to the Southeast Asian region. Vietnam's maximum tax rate is currently 35%, equivalent to Thailand and the Philippines. Singapore's highest tax rate is only 24%, while Malaysia and Myanmar are 30%.

Meanwhile, taxable income at each level in Vietnam is quite low compared to the region.

Therefore, Deloitte proposed that the Ministry of Finance should not only adjust the progressive tax schedule as drafted but also consider increasing the taxable income level, especially at the highest level, to match the economic growth rate, ensuring increased competitiveness and attracting high-quality human resources.

Meanwhile, the Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) proposed raising the tax threshold at levels 2 and 3 to reflect the reality of inflation in recent years.

Specifically, Vietcombank proposed level 2 at 15-45 million VND/month (or rounded to 50 million VND), level 3 from 45-75 million VND/month (or rounded to 80 million VND). For higher levels (levels 4 and 5), the bank believes that it is also necessary to adjust in the direction of raising the tax threshold, in order to really hit the high and very high income groups.

Regarding tax rate design, Vietcombank proposed to differentiate more clearly between low-income and high-income groups, instead of evenly spaced at 5% as in the draft.

Specifically, when merging the old levels 2 and 3 into two new levels, the bank recommends applying the tax rate as the old level 2 (10% or lower), instead of 15%. Similarly, when merging the old levels 4 and 5 into the new level 3, the tax rate should be kept as the old level 4 (20% or lower), instead of 25%.

Vietcombank said that in some Southeast Asian countries, the threshold for applying the highest tax rate is often set at a very high level compared to GDP per capita. For example, in the Philippines it is 17 times, and in Malaysia it is 36 times. From there, the bank suggested that Vietnam should choose an intermediate level, about 20-25 times GDP/person. If calculated at a rate of 20 times, the starting threshold for level 5 would be about 200 million VND/month.

Vietnamnet.vn

Source: https://vietnamnet.vn/ap-thue-thu-nhap-ca-nhan-cao-nhat-chi-nen-25-2443957.html