MoF tax plan takes aim at bigger earner target number of earn

The state wants to claw back greater amounts of tax from high income earners

Under the Ministry of Finance’s (MoF’s) draft law on personal income tax (PIT), both foreigners and Vietnamese would have to pay the same rate of tax, with the initial rate falling to 5 per cent from the current 10 per cent.
Current regulations set different tax regimes for foreigners and Vietnamese, with PIT only applicable to foreign citizens earning over VND8 million per month ($520), while Vietnamese citizens pay tax on earnings above VND5 million ($320) per month.
The current system imposes a tax rate of 10 per cent on earnings above the thresholds set for Vietnamese and foreigners respectively.
Deputy head of the PIT Department of the General Department of Taxation (GDT), Dinh Nam Thang, said that “both foreigners and Vietnamese will have to pay PIT on an equal basis” under the proposed new system.
While Thang did not reveal the specifics of the new thresholds proposed in the draft law, he said it was likely that even workers earning as little as VND1 million per month ($64) would pay some tax. “The PIT will likely exclude some expenses of income earners for living conditions and supports to their families,” he said.
The draft law on PIT is expected to be submitted to the National Assembly by the end of this year, with the new rulings to come into effect from 2008, he said.
Analysts said that a new tax regime with a lowered PIT threshold and an initial tax rate of 5 per cent promised a substantial revenue increase for the State.
According to the MoF, the State gained VND4.3 trillion ($275 million) from PIT last year, 60 per cent of which was levied on foreigner workers.
It is estimated that there are currently some 400,000 workers paying PIT nation-wide, a number set to increase drastically under the new law.
According to the GDT, PIT will account for around 2.1 per cent of State revenues this year, with this figure set to rise to 6 per cent by 2010.
Nguyen Thi Cuc, deputy director of the GDT, said that more and more Vietnamese were becoming liable for PIT as incomes around the nation increased in-line with economic diversification and the growth of the service and industrial sectors.
“Vietnamese singers, lawyers, doctors, auditors, and so on are becoming the main subjects for PIT payment,” Cuc said, adding that between them Vietnamese singers were required to pay only VND1.5 billion ($100,000) of PIT for their performances last year.
“Even, the well-known singer My Tam is required to pay more than VND300 million ($20,000) for her performances and other activities such as advertising and sponsorship,” Cuc said.
However, according to the GDT, the most difficult task facing the department at present is to determine who should pay PIT, as many Vietnamese still eschew bank accounts and electronic payment systems in favour of cash.
“Most people still use cash for their daily activities,” Cuc said.
“It is also rather difficult for tax agencies to control the declaration of PIT by representative offices,” she said.
Vietnam has so far has signed agreements on double tax avoidance with 43 countries.




No. 761/May 15-21, 2006