Many shortcomings of the Personal Income Tax Law

Tax adjustment when CPI increases by 5% or more

According to economic experts, businesses and business households in Ho Chi Minh City, it is very late to collect opinions on amending the Personal Income Tax Law because this law has many shortcomings, especially when the consumer price index (CPI) has increased by 20%. Therefore, in the new provisions of the law, the Government should be allowed to adjust the personal income tax rate when the CPI increases by 5% or more. This will help the law keep up with the fluctuations in real life, because waiting for the National Assembly to amend the law will take a long time.

The CPI has increased by 20% but the deduction level for calculating personal income tax has not been adjusted to match reality. Photo: Le Hang

Lawyer Pham Ngoc Hung - Vice President of the Ho Chi Minh City Business Association said that the Personal Income Tax Law has up to 7 levels of calculation, making it difficult to calculate taxes and creating pressure for taxpayers. Meanwhile, the gap between the levels is unreasonable, short and narrow. Lawyer Hung suggested that it should be shortened to 5 levels.

According to lawyer Pham Ngoc Hung: "Every year, the State should review and calculate the inflation rate. Calculating the inflation rate based on the statistics industry's figures compared to the actual spending of housewives is not appropriate. This should be adjusted as soon as possible, creating a better income for people, creating a vibrant market, greater purchasing power, and supporting businesses to produce and do business better."

Taxable amount must be from 15 million VND/month or more

According to Master, Lawyer Do Trong Hien, Director of CTB Do Gia Company Limited, the Personal Income Tax Law stipulates income tax for individual business households which is not suitable. With a revenue of 100 million VND/year, equivalent to 8.3 million VND/month, taxes and fees must be paid. Meanwhile, the personal income tax rate for employees is from 11 million VND/month. At the same time, there are no clear regulations and instructions on tax declaration for individual business households with revenue of less than 100 million VND/year, which also causes confusion for taxpayers.

Master, lawyer Do Trong Hien - Director of CTB Do Gia Company Limited. Photo: Le Hang

In addition, many taxpayers believe that the regulation on personal income tax for salaried employees of 11 million VND/month is very outdated, especially compared to the living standards in urban areas. This tax rate must be from 15 million VND/month or more. The family deduction of 4.4 million VND/month is unreasonable compared to the actual basic expenses for dependents, especially the cost of education for children and sick, elderly parents...

This deduction level must be from 6 million VND/month to be appropriate. It is worth mentioning that the law currently stipulates that the only deductible items are dependents, insurance premiums, charity, and education incentives. Meanwhile, many actual and reasonable expenses of taxpayers have not been deducted.

Lawyer Do Trong Hien said: "There are many necessary expenses incurred by taxpayers that the Ministry of Finance does not list for tax deduction. Medical examination and treatment costs, bank loans to cover living expenses, house construction and repair... those expenses are not included in the deduction when calculating tax. In my opinion, we need to adjust accordingly, which expenses are reasonable, valid, and have full documents. According to the Tax Law, we can include them in the deduction before calculating personal income tax."

Cut income tax to attract experts

According to many experts working for foreign-invested enterprises in Ho Chi Minh City, an income of over VND80 million/month subject to 35% personal income tax is very high and not suitable for Vietnam. It will not encourage highly qualified and professional domestic workers to strive to work in senior management positions. Work pressure must go hand in hand with a worthy source of income, but after deducting personal income tax, the actual difference is not much compared to middle-level workers.

Mr. Nguyen Van Duoc - Head of Policy Department of Ho Chi Minh City Tax Consultants and Agents Association talked with VOV reporter about comments on amending and supplementing the Law on Personal Income Tax. Photo: Le Hang

Mr. Nguyen Van Duoc - Head of the Policy Department of the Ho Chi Minh City Tax Consultants and Agents Association proposed: "This 35% tax rate will affect competition in the region. Because the higher the income tax, the more workers will tend to work or declare taxes in places with lower tax rates, so we should reduce it from 35% to 30%. When we adjust it down, we can attract foreign experts to work in Vietnam, and at the same time, we can mobilize experts working in many countries to bring their income in other countries back to Vietnam to declare taxes"./.