Proposal to lower personal income tax ceiling to 25%

Progressive tax schedule reduced from 7 levels to 5 levels

The Ministry of Finance has just announced the Summary of comments, acceptance and explanation of comments and policy consultations from agencies, organizations, localities, associations and individuals on the draft Law on Personal Income Tax (amended). The Ministry of Finance said it has received a total of 382 comments. Among them, the content on adjusting the tax rate table and lowering the tax rate has received much attention and comments.

In the latest draft of the Law on Personal Income Tax (amended), the Ministry of Finance has submitted to the Government a progressive tax schedule that has been shortened from 7 levels to 5 levels. In addition, taxable income has also been extended compared to the current one. With this proposed plan, after family deductions, employees with a taxable income of 10 million VND per month will have to pay tax at a rate of 5%. Income from 10 million to 30 million VND will pay 15%, income from 30 to 60 million VND will pay 25%, income from 60 to 100 million VND will pay 30% and the maximum tax rate is 35% for taxable income over 100 million VND/month.

According to the Ministry of Finance's calculations, when adjusting the tax schedule according to the above plan, the budget revenue reduction will be about 8,740 billion VND.

Proposal to lower personal income tax ceiling to 25%

In the summary of comments on the Draft Law, many Associations, agencies and organizations assessed that the reduction from 7 to 5 personal income tax rates has made the tax system simpler and easier to calculate. However, opinions still suggested widening the gap between the rates and lowering the maximum tax rate from 35% to 25% to increase competitiveness in the region and attract high-quality human resources.

Ms. Vu Thi Thuy Hang (Da Phuc commune, Hanoi ), a worker in the technology industry, believes that a personal income tax rate of up to 35% will reduce work motivation. Because the more you work, the less you keep for yourself, while the cost of living is getting more and more expensive.

"The 35% level is quite high. Quality workers might try to move to foreign countries, which would lead to a brain drain. I think it should only be 25-30%, but 35% is too high," said Ms. Hang.

Deloitte Vietnam representative said: Vietnam is in the group of countries with high personal income tax compared to the Southeast Asian region, while the taxable income threshold is low.

Ms. Vu Thu Ha - Deputy General Director of Tax Consulting Services, Deloitte Vietnam said: "Thailand also applies 35% but the starting level is 3.7 billion VND per year. Singapore's tax rate is only 24%, much lower, but it is applied to people with very high incomes of over 20 billion VND/year. Or Malaysia applies the highest tax rate of 30% and the starting level is 1.6 billion VND. Such a comparison shows that we are calculating higher taxes, earlier than other countries. It can also affect the retention and attraction of talent."

Therefore, in the comments on the Draft Law on Personal Income Tax (amended), many opinions proposed to remove the 35% tax rate and lower the ceiling to 25%. Typically, the National Assembly Delegation of Nghe An province proposed to study the reduction of tax rates at each level, to ensure the highest rate is 25% to encourage and motivate taxpayers. The National Assembly Delegation of Son La province proposed to assess the impact of each progressive rate, especially the two tax rates of 30% and 35%, because these are high tax rates.

In addition, according to World Bank data, in 2009, Vietnam's GDP per capita was about 20.9 million VND. By 2024, this figure reached nearly 114 million VND, an increase of 5.4 times. However, while in 2009 the highest tax rate of 35% applied to income from 80 million VND, now the Ministry of Finance only proposed to raise this threshold to 100 million VND, an increase of about 25%.

In 2009, a bowl of pho like this cost an average of only 15,000 - 20,000 VND. Now the price has doubled, tripled. However, after 17 years, the income level to apply the highest proposed tax rate has only increased by 25%. This difference requires adjusting tax policies to be more suitable to real life.

Ms. Bui Thi Le Phuong - Director of Centax Tax Accounting Finance Company Limited said: "My opinion is that 120 to 150 million is subject to 35% tax, the levels must be extended to be appropriate. It will encourage high-income earners to voluntarily pay taxes."

In addition, many opinions also commented on the fact that the proposed 5-level tax schedule in the draft has a sharp jump in tax rates. Level 1 tax rate is 5%, while level 2 has increased to 15%, a 3-fold increase. This will affect the livelihood of workers whose only source of income is wages and salaries.

Proposal to increase family deduction to 16 - 20 million VND

Another content that has received much attention and contributed to the Draft Law on Personal Income Tax (amended) is the family deduction level. Recently, the Ministry of Finance proposed to choose option 2 on the family deduction level. Accordingly, the deduction level for taxpayers will be increased to 15.5 million VND/month and for each dependent is 6.2 million VND/month. The Ministry of Finance said that the basis of this proposal is that the average GDP per capita in 2024 has increased by about 40% compared to 2020.

Commenting on the draft Law on Personal Income Tax (amended), many opinions proposed to raise the family deduction level higher than the option of 15.5 million VND/month.

The Ministry of Finance said it had received many comments in agreement with option 2: Increasing the deduction for taxpayers from 11 million VND/month to 15.5 million VND/month and for each dependent from 4.4 million VND/month to 6.2 million VND/month, an increase of about 40.9%. This level is calculated based on the growth rate of average income per capita and average GDP per capita from 2020 to 2024.

With this plan, the budget is expected to decrease by 21,000 billion VND per year. People with salary and wage income of 15.5 million VND per month will not have to pay personal income tax, after deducting social insurance, health insurance, and unemployment insurance. However, many opinions still believe that it needs to be adjusted higher.

Renting a house for 6 million VND, electricity and water, and paying for children's education... not including food, Ms. Huyen and her husband have to spend more than ten million VND each month. Therefore, she believes that the above proposed deduction level of the Ministry of Finance is only reasonable for this year and may soon become obsolete next year.

"Normal vegetables are 10,000 - 15,000 VND a bunch, but during the storm, they are 25,000 - 30,000 VND, and last for 1-2 weeks, not just 1-2 days. Meat, fish or other foods also increase by 15-20%. I want to increase the family deduction to 17-18 million VND for direct workers, and dependents in addition to 7 million VND. I also want to have more savings to soon have a house, instead of having to rent until retirement", Ms. Chu Thi Huyen - Cau Giay Ward, Hanoi City shared.

Mr. Ta Cong Minh - Cau Giay Ward, Hanoi City expressed: "I also hope to increase the deduction for dependents to over 7 million, to make it easier for families."

Many opinions say that the new draft proposal is only based on GDP per capita income by 2024. It is expected that GDP per capita income by the end of 2025 may increase by about 50% compared to 2020. Therefore, the Ho Chi Minh City National Assembly Delegation proposed that the family deduction for taxpayers should increase by 16.5 million VND, and for dependents by 6.6 million VND.

The National Assembly delegation of Dien Bien province proposed to increase the family deduction for taxpayers to 20 million VND/month and 10 million VND/month for each dependent, to support people in the face of living cost pressure, while at the same time nurturing a sustainable source of income.

According to experts, the current law stipulates that only when the consumer price index (CPI) fluctuates by 20% will the National Assembly consider increasing the family deduction level. Therefore, it will take several years to make adjustments. Meanwhile, the CPI is a general index of 752 types of goods and services, but the group of essential goods - less than 20 items - often fluctuates strongly. Therefore, the prices of vegetables, meat, and fish can increase much faster than the rate of inflation. Therefore, some opinions suggest that it is possible to consider giving the Government the power to flexibly adjust the annual family deduction level.

Mr. Tran Anh Quan - Economic - Financial expert commented: "If the family deduction level is updated more frequently, for example every year or every two years, it will be less disadvantageous for workers, when they have many expenses to pay for life."

A bowl of pho today may have increased in price next year. Therefore, when drafting the Law, it is necessary to consider the mechanism for adjusting the family deduction level to match the economic growth rate, to avoid the situation where the newly issued Law becomes outdated.

The Ministry of Finance said that it would like to acknowledge the comments on the Draft Law on Personal Income Tax (amended). The Ministry will study and complete the draft to be submitted to the National Assembly in October this year. In addition to the current family deduction, the Ministry of Finance also proposed to study and add other specific deductions to suit the practical situation such as expenses related to education and health care.

Source: https://vtv.vn/de-xuat-ha-tran-thue-thu-nhap-ca-nhan-xuong-25-100250925065813192.htm