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Taxable income bar to be raised amid price hike
The Law on Personal Income Tax will be amended and income earners may only pay the tax when their income exceeds 6 - 8 times the minimum salary, according to a Finance Ministry official.
According to Deputy Minister of Finance Phan Chi Trung, the government should raise the taxable income threshold, which currently stands at VND5 million, to better reflect the actual situation in Vietnam.
Recently, petrol and electricity prices have been raised, leading to a hike in almost every commodity.
The ministry is considering making certain amendments to the personal income tax law, to be submitted to the National Assembly for consideration next year, he said.
This is in line with recent public opinions that taxable income rates in the law are too obsolete compared to the current situation.
The prices of many commodities and services have soared sharply after the rises in prices of petrol, up over 17 percent, and electricity, up more than 15 percent.
Meanwhile, the starting level over which an income is to be taxed remains unchanged, which puts a big burden on taxpayers, who have seen the purchasing power of their income decline considerably due to the price hike.
For example, the actual purchasing power of VND4 million (US$192.6) at present is equal to VND2.5 million ($124.6) in late 2007, when the law was passed, said lawyer Le Thanh Kinh.
Economic expert Pham Chi Lan suggested that the starting taxable income should be tenfold the minimum salary.
In addition, deductions for family considerations should not be regulated at a fixed rate as is the case now, but it should be proportional to the taxable income, she said.
Either raise threshold or lower tax rate
According to an official of the Finance Ministry, there are two options that may be proposed to the Government.
The first option is to raise the starting taxable income to 6-8 times the minimum salary for domestic manufacturing sector, which now range between VND830,000 ($40) and VND1,350,000 ($65) per month, depending on where taxpayers are living.
At the same time, deductions for family considerations will be thrice the minimum salary.
Meanwhile, the second is very simple, just lowering the first tax rate of 5 percent to only 1 or 2 percent, the official said.
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