Changes in personal income tax rates do not significantly affect budget revenue.

(Baonghean)Starting July 1, 2013, the Personal Income Tax Law officially came into effect. Instead of the previous threshold of 4 million VND, the new law stipulates that only employees with incomes exceeding 9 million VND are subject to tax. This will have an impact on budget revenue collection in the area.

On this occasion, a reporter from Nghe An Newspaper had an interview with Mr. Nguyen Hong Hai, Deputy Director of the Nghe An Tax Department, regarding this issue.

PV: From July 1st, 2013, how will the income threshold for Personal Income Tax (PIT) and the personal allowance for PIT change, sir? And what impact will this have on budget revenue in the area?

Mr. Nguyen Hong Hai:Article 1 of the 2012 Personal Income Tax Law amends Clause 1, Article 19 of the 2007 Personal Income Tax Law: From July 1, 2003, personal income tax changes. The personal allowance for taxpayers is increased from 4 million VND/month (48 million VND/year) to 9 million VND/month (108 million VND/year); the allowance for each dependent is increased from 1.6 million VND/month to 3.6 million VND/month.

Raising the personal allowance will reduce state budget revenue, narrow the number of taxpayers, and alter some of the initial objectives of the Law on revenue sources. However, the amended Personal Income Tax Law aims to ensure fairness, encourage and attract experts and skilled workers with high incomes to work in Vietnam; facilitate taxpayers and contribute to promoting administrative reform and modernization of tax management; and align with taxable income levels in the region and internationally.

In 2011, personal income tax revenue in the province reached VND 189.7 billion. This increased to VND 238 billion in 2012, and in the first six months of 2013, VND 117.5 billion was collected. Although the annual personal income tax revenue has increased, compared to Nghe An's total budget revenue of over VND 5,000 billion in recent years, the amount of personal income tax collected is not significant and therefore does not have a major impact on the province's overall budget revenue.

PV: Also, from July 1st, 2013, some tax payment procedures under the amended Tax Administration Law came into effect. Could you elaborate on this, sir?

Mr. Nguyen Hong Hai:The Law on Tax Administration No. 21/2012/QH13 amends and supplements several articles of the Law on Tax Administration No. 78/2006/QH11 and came into effect on July 1, 2013. It adds several provisions to enhance the effectiveness and efficiency of tax administration to align with reality and relevant legal documents, aiming to combat budget revenue losses and reduce tax arrears, including the following nine specific contents:

Production of storm-resistant bracing at Dinh Nhan Co., Ltd. - Vinh City. Photo: CL

Firstly: The order of payment of taxes and penalties will be changed to enhance the efficiency of tax debt collection and facilitate the implementation of domestic tax accounting. Accordingly, the payment order is stipulated as follows: outstanding tax; tax arrears; late payment penalties; newly incurred tax; penalties.

Secondly: The tax payment deadline should be extended for businesses that are required to relocate their business premises at the request of competent state authorities, and for businesses with outstanding tax debts due to unpaid capital investment for basic construction projects already included in the state budget.

Thirdly: Adding regulations for installment tax payments for taxpayers unable to pay the full amount at once: allowing taxpayers to pay their tax debts in installments over a specified period (with a late payment penalty of 0.05% per day, equivalent to 1.5% per month, or 18% per year). Installment tax payments are based on a commitment from the taxpayer and a guarantee from a credit institution to reduce the need for tax enforcement and support taxpayers, especially those with large tax debts (due to penalties ranging from 1 to 3 times the tax amount) and facing short-term financial difficulties.

Fourth: Write off tax debts and penalties for debts that are unlikely to be recovered after all enforcement measures have been applied, and for debts that have been outstanding for more than 10 years;

Fifth: Supplementing coercive measures for enforcing administrative tax decisions: deducting money from the subject's account at the State Treasury, commercial banks, and other credit institutions and freezing the account; deducting a portion of salary or income; suspending customs procedures for exported and imported goods; declaring invoices invalid; seizing and auctioning seized assets; collecting money from other assets of the subject of enforcement held by organizations or individuals; revoking business registration certificates, enterprise registration certificates, establishment licenses, or professional licenses;

Sixth: Supplementing penalties for violations of tax laws: increasing the penalty for late payment of taxes at a progressive rate of 0.05%/day calculated on the amount of tax overdue for delays not exceeding 90 days, and 0.07%/day calculated on the amount of tax overdue for delays exceeding 90 days; and increasing the penalty for incorrect declarations resulting in underpayment of tax or an increase in the amount of tax refunded from 10% to 20%.

Seventh: The statute of limitations for handling tax law violations is now stipulated to apply a tax recovery period of 10 years (previously 5 years) from the date of inspection and discovery, in order to comply with the regulations on document archiving in the Accounting Law.

Eighth: Tax audits at taxpayers' premises are conducted based on risk assessment criteria; on specific topics and annual plans approved by the head of the superior tax authority; and at the taxpayer's premises no more than once a year. This regulation helps the tax authorities control the purpose of audits while preventing abuse and inconvenience for businesses.

Ninth: Amend tax management provisions to align with other laws, such as amending provisions on tax declaration and payment deadlines and tax inspection procedures to align with land law, the Law on Non-Agricultural Land Use Tax, and the Law on Inspection.

Interviewer: Thank you, sir!

Chau Lan (compiled)