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Desperate times
A man reads job notices on an electric pole in downtown Ho Chi Minh City. Vietnamese economists are calling on government officials to implement some sort of emergency relief as inflation and prices soar.
As the government considers modifying the Law on Personal Income Tax, experts say that it should institute an emergency income tax exemption in the interim.
Taxpayers complain that the law is outdated and does not take recent rises in inflation into account. Meanwhile, the taxable income threshold and dependent deductions remain far too low.
Inflation has continued to soar during the last several years. At the beginning of March, petrol prices jumped more than 17 percent and power prices rose more than 15 percent on February 24.
Despite significant rises in the cost of living, the taxable income threshold has been left unchanged at VND4 million (US$192) per month.
The VnExpress news website on Thursday quoted an “authorized” source from the Finance Ministry as saying the General Department of Taxation would study revisions in the existing law.
Written in stone
Lawmakers approved Vietnam’s Personal Income Tax law in late 2007. It took effect in January 2009 and allowed taxpayers to deduct VND1.6 million per dependant. Since then the limits on dependent earnings and deductions have remained the same.
Tran Xoa, Director of HCMC-based Minh Dang Quang Law Company, said that the taxable income threshold should be raised soon.
He also said that the VND500,000 monthly salary cap for dependents should be raised to VND1.5 million.
Vietnam adjusts its minimum wage every year. Currently, minimum pay ranges from VND830,000 to VND1.55 million, depending on the location of the employee.
Economist Pham Chi Lan told the Tuoi Tre newspaper that the taxable income threshold should be calibrated at ten times the minimum monthly wage.
Dinh Xuan Thao, Director of the National Assembly’s Institute for Research on Legislation, said he appreciates the suggestion that a new taxable income threshold should be calculated against the minimum wage so that tax levels remain a fair and accurate reflection of national earnings.
Tax exemption, reduction
While economists have urged the government to amend the Personal Income Tax Law as soon as possible, no action has been taken to date.
Some experts say that the government should implement some sort of emergency action by either implementing a temporary tax exemption for everyone or halving income taxes across the board.
“There is a precedent here,” said Nguyen Thai Son, Director of Saigon Tax Consultancy Company. “The government once extended personal income tax exemptions to everyone for the first six months of 2009.”
Despite fears that the exemption would deal a blow to the state budget, 2009 proved a banner year for government revenues thanks to an increase in payments of other taxes.
The National Assembly approved the tax exemption policy for the first half of 2009, saying the move was needed in order to stimulate economic growth during the global downturn.
“This time, though, the economic context is different, but the point is that income earners are facing financial difficulties as prices are soaring,” said Son. “Tax exemptions would ease their burdens.”
Dr. Nguyen Van Thuan, Dean of the Faculty of Accounting, Finance and Banking at Ho Chi Minh City Open University, said that if the government is still worried that another such temporary tax break would affect revenues for the state budget, it could opt to reduce taxes by 50 percent.
Thanh Xuan-Tran Tam
thanhnien
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