Workers set for a tax break

Once approved, how will the new PIT payment threshold affect PIT payers?

Of current 3.87 million PIT payers, 2.84 million people tantamount to more than 73 per cent of total which are paying tax in grade 1 level will not be subject to paying the tax, whereas 72 per cent of grade 2 level tax payers will step into paying tax in grade 1 level.

Those paying tax from grade 3 to grade 7 also enjoy smaller payment amounts on the back of higher threshold and dependant reduction level (from VND1.6 million or $76 to VND3.6 million or $171 to each dependant).

Could you shine further light on this?

Under current regulations, with one dependant one individual having monthly incomes up to VND10 million ($476) will have to pay personal income tax amount of VND220,000 ($10.4) per month, to VND15 million ($714) the PIT amount will be VND690,000 ($32.8), to VND20 million ($952) tax amount be VND1.41 million ($67), to VND25 million ($1,190) tax amount be VND2.23 million ($106) and to VND30 million ($1,428) tax amount be VND3.23 million ($153).

Meanwhile, under the new proposal with one dependant an individual with monthly incomes up to VND12.6 million ($600) is still immune from PIT payment. For monthly incomes levels of VND15 million, VND20 million, VND25 million and VND30 million respective payment levels each month will be VND120,000 ($5.7); VND490,000 ($23); VND1.11 million ($52) and VND1.86 million ($88).

If rearing two dependants, respective payment levels to individuals with monthly incomes up to VND20 million, VND25 million and VND30 million will be VND190,000 ($9); VND630,000 ($30) and VND1.32 million ($62) instead of the current payment levels of VND1.17 million ($55); VND1.92 million ($91) and VND2.91 million ($138) whereas individuals with monthly incomes up to VND16.2 million ($771) is immune from PIT payment.

Highly paid people also benefit from remarkable tax reductions. For instance, each month an individual having monthly incomes of VND50 million ($2,380) and VND60 million ($2,850) if rearing one dependant will have to pay PIT amount of VND6.1 million ($209) and VND8.6 million ($410) per month versus current levels of VND7.85 million ($373) and VND10.47 million ($498).

Does this mean better living conditions for taxpayers?

Ministry of Finance calculations show that in the last six months of 2013 alone, existing PIT payers will save VND5.160 trillion ($245 million) in their incomes thanks to lower tax. In 2014, PIT payers would save VND13.350 trillion ($635 million) in incomes.

Will the move put a dent in the state budget?

The higher PIT payment threshold and dependant reduction level will inevitably entail a decline to the state budget. However, alongside national economic development people’s living standards will be improved which will contribute to driving up payment to state coffers.

After three years of enforcement of the PIT Law, PIT payments kept rising constantly in volume.
Particularly, in 2009 PIT collection amounted to 110 per cent of that in 2008, in 2010 it equaled 183.6 per cent of 2009’s implemented level and in 2011 it was 146.6 per cent of 2010 level.

In 2008, PIT contribution made up 0.87 per cent of the GDP, rising to 1.52 per cent in 2011.