Less taxing time on horizon

After three months of seeking opinions from related ministries and agencies, the Ministry of Finance (MoF) last week proposed a latest draft for the revised Law on Personal Income Tax (PIT) to the government.

The draft’s biggest changes are in the taxable income threshold to increase to VND9 million ($432) from the current VND4 million ($193) and taxable income deductions up to VND3.2 million ($153) from VND1.6 million ($77) for each dependant.

The amended PIT Law is expected to be approved by the National Assembly (NA) in late 2012 and come into effect in July 2013, instead of January 1, 2014 as initially planned. Deputy MoF Minister Vu Thi Mai said the proposed amendment meant 70 per cent out of the current 3.8 million taxpayers [out of the 87-million population] would be PIT exempted. The collected tax was estimated to reduce by $250 million in 2013 and by $649 million in 2014.

Initially, the MoF in March 2012 proposed the taxable income threshold be raised to VND6 million ($288) and taxable income deductions up to VND2.4 million ($116) for each dependant. But economists argued that those levels would be outdated in 2014 when the revised law takes effect. Nguyen Thi Cuc, former deputy director of the General Department Taxation, said the moves, if approved, would lessen financial burdens on taxpayers.

“However, I worry about the unchanged progressive tax tariff which should be expanded to ensure fairness for taxpayers,” said Cuc, who is also chairwoman of Vietnam Tax Consulting Association.
She said the gap between tax levels was too small, just VND5 million ($240) between the first and second levels.

“With the MoF’s proposal, taxpayers at the high tax levels would not benefit much which could discourage many skilled and qualified labourers, especially foreign experts, from working in Vietnam.

“In many other countries, the gap between the lowest and highest levels is quite large, such as 53 times in China, 50 times in Philippine, 40 times in Indonesia, while it is only 16 times in Vietnam. Therefore, to ensure fairness among taxpayers, the National Assembly should consider expanding the gap between tax levels or reduce tax level numbers less than seven levels as currently,” Cuc added.

According to the MoF, after five years of the PIT Law, the prices of goods have increased sharply and badly impacted on taxpayers’ lives. Therefore, the taxable threshold and deductions from taxable income were outdated.