Lowly paid workers to escape PIT

On October 26, Minister of Finance (MoF) Vuong Dinh Hue proposed the revised Personal Income Tax (PIT) draft law to the National Assembly, which raised the taxable income threshold up to VND9 million ($432) per month and the deduction from taxable income going up to VND3.6 million ($173) for each dependant.

Under the current PIT Law, the taxable income threshold begins at VND4 million ($193) per month for local and foreign workers in Vietnam. It allows taxpayers to deduct VND1.6 million ($77) for each dependant. Dependents are those who earn less than VND500,000 a month.

Hue said that the threshold of VND9 million per month was equivalent to 2.5 times of GDP per capita in 2014 that can ensure the same rate as the effective moment of the 2006 PIT Law, adding that this level was also higher than income per capita in 2014.

"In such a current situation of high inflation, people's low income, to raise the deduction from taxable income showed the state is sharing difficulties with people," said Hue.

The MoF estimated that if the threshold of VND9 million was applied, there would be only one million taxpayers left instead of nearly 4 million as currently. The budget collection would also be reduced around VND15 trillion ($750 million) per year.

The draft law also supplemented that in case consumer rice index (CPI) fluctuated more than 20 per cent, the government would propose to the National Assembly's Standing Committee to adjust the deduction from taxable income in line with this fluctuation in prices.

The government also said that the revised law should be applied sooner, expected to July 1, 2013 to support taxpayers facing difficulties.