ANTD.VN - The Ministry of Finance proposed to consider the option of assigning the Government to regulate the family deduction level to ensure flexibility and proactive adjustment to suit the reality of each period.
The above proposal is stated in the proposal to develop the draft Law on Personal Income Tax (replacement) that has just been announced by the Ministry of Finance for comments.
Assign the Government to prescribe the family deduction level
In the draft, the Ministry of Finance proposed to study and adjust regulations on family deduction levels to suit changes in living standards, price indexes and macroeconomic indicators in recent times.
According to the current Personal Income Tax Law, individuals are entitled to deduct social insurance, health insurance, unemployment insurance, professional liability insurance for certain occupations that require compulsory insurance, minus family deductions, charitable and humanitarian contributions, allowances and subsidies as prescribed... the remaining amount is the income used as the basis for calculating personal income tax.
Currently, the deduction for taxpayers is 11 million VND/month (132 million VND/year); the deduction for each dependent is 4.4 million VND/month. With this deduction, people with income from salary and wages of 17 million VND/month (if having 1 dependent) or 22 million VND/month (if having 2 dependents) after deducting social insurance, health insurance, unemployment insurance... currently do not have to pay personal income tax.
According to the 2023 Population Living Standards Survey Report published by the General Statistics Office (Ministry of Planning and Investment), Vietnam's average monthly income per capita in 2023 (at current prices) is 4.96 million VND and the group of households with the highest income (the group of the richest 20% of the population) has an average income of 10.86 million VND/month/person. Accordingly, the current deduction for taxpayers (11 million VND/month) is more than 2.21 times higher than the average income per capita (much higher than the common level applied by other countries), equivalent to the average income of the richest 20% of the population.
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Need to review and re-evaluate personal income tax family deduction level |
However, the Ministry of Finance acknowledges that the current family deduction level has been applied since 2020, so it is necessary to review and re-evaluate to propose amendments and supplements in accordance with new conditions. The specific family deduction level needs to be carefully studied and calculated to ensure that it is consistent with price fluctuations as well as the increase in people's living standards in the recent period as well as forecasts for the coming time, while not reducing the role of personal income tax policy in the tax system.
“The “too high” deduction level will obscure the role of personal income tax policy in performing the functions of this tax (ensuring social equity and income regulation) and will invisibly return personal income tax policy to “tax policy for high-income earners” as in the previous period” – the Ministry of Finance stated its opinion.
The Ministry of Finance also proposed to consider studying the option of assigning the Government to regulate the family deduction level to ensure flexibility and proactive adjustment to suit the reality and requirements of the country's socio-economic development in each period. Currently, this adjustment is decided by the National Assembly Standing Committee.
The Ministry also proposed to supplement the scope of determining deductible charitable and humanitarian contributions (social funds, charity funds); study and supplement other specific deductions (medical and educational expenses); and assign the Government to specify details and provide implementation instructions to suit emerging practices.
“However, the scope of deductible expenses and the level of deduction for expenses need to be considered and calculated appropriately to achieve the set goals but also not reduce the role of personal income tax policy as a tool to regulate income and implement redistribution” – the draft submission of the Ministry of Finance stated.
Reduce progressive tax rates
In the draft, the Ministry of Finance also proposed to study and adjust the progressive tax schedule applicable to resident individuals with income from salaries and wages.
Currently, the progressive tax schedule applies to income from wages and salaries with 7 tax brackets with tax rates: 5%, 10%, 15%, 20%, 25%, 30% and 35%. Through the actual implementation process, there is a view that the current progressive tax schedule is unreasonable, there are too many brackets, the gap between brackets is too narrow, easily leading to a jump in tax brackets when summing income at the end of the year, increasing the amount of tax payable, the number of tax settlements increases unnecessarily while the amount of additional tax payable is not much.
The Ministry of Finance believes that, through reviewing the current tax structure and studying the trend of improving people's living standards in the coming time as well as international experience, Vietnam can study to reduce the number of tax rates of the current Tax Schedule from 7 rates to an appropriate level; Along with that, consider widening the income gap in tax rates, ensuring higher regulation for those with income at high tax rates.
Implementing this direction will contribute to simplifying and reducing the number of tax levels to facilitate taxpayers' tax declaration and payment.
The amendment of the Personal Income Tax Schedule will be carefully studied and considered and must be consistent with the orientation set out in the Tax System Reform Strategy to 2030, ensuring that it is consistent with the socio-economic context, income and living standards of the people and with international practices, especially with countries with similar conditions, while ensuring the rights of workers, encouraging the development of the labor market in the context of international integration, and ensuring revenue for the State budget.
Source: https://www.anninhthudo.vn/de-xuat-giao-chinh-phu-dieu-chinh-muc-giam-tru-gia-canh-thue-thu-nhap-ca-nhan-post596535.antd
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