Five-tier tax schedule could demotivate workers to increase their income

Giving opinions at the Group on the Law on Personal Income Tax (amended) on the afternoon of November 5, many delegates expressed their opinion that instead of applying a tax rate of 35% to taxable income over 100 million VND/month, this tax rate should be applied to income over 150 million VND/month.

Delegate Nguyen Thanh Phuong ( Can Tho delegation) said that the current 5-tier tax schedule is unreasonable. Specifically, people with an income of 10 million VND/month are subject to a 5% tax rate, but if it increases to 11 million VND, they will be subject to a 15% tax rate, creating a huge gap between the two tiers. Meanwhile, the group of people with an income of 10 to 60 million VND/month accounts for the largest proportion.

Therefore, delegate Phuong proposed to consider readjusting the tax rates, in the direction of expanding them to 7 progressive rates, specifically as follows: Up to 10 million VND: 5%; from 10 - 30 million VND: 10%; 30 - 60 million VND: 15%; 60 - 100 million VND: 20%; 100 - 130 million VND: 25%; 130 - 160 million VND: 30%; Over 160 million VND: 35%.

“Currently, the average income per capita in our country is still low, while the 35% tax ceiling is quite high compared to many countries with higher average income. Therefore, it is necessary to recalculate to have a reasonable tax schedule, both ensuring revenue and creating motivation for workers,” said delegate Nguyen Thanh Phuong.

Sharing the same view, delegate Hoang Van Cuong ( Hanoi delegation) said that instead of 7 levels as currently, according to the draft, the tax table is adjusted down to 5 levels with the distance between levels increasing gradually to 10, 20, 30, 40 million VND. The 5 levels correspond to tax rates of 5%, 15%, 25%, 30%, 35%. The last tax rate is 35% applied to taxable income over 100 million VND/month.

According to Mr. Cuong, the 5-level tax schedule in the draft Law is unreasonable.

“Taxable income up to 10 million VND is subject to a tax rate of 5%, but taxable income from 10 to 30 million VND “jumps” immediately to 15%. That means income of 11 million VND is also subject to a tax rate of 15%. Or taxable income from 30 million to 60 million VND will be subject to a tax rate of up to 25%.

This is unreasonable because if workers' income increases a little, taxes can increase a lot. This can make workers lose their motivation to strive and try to increase their income," said delegate Hoang Van Cuong.

Instead of applying a 5-step tax schedule, delegate Hoang Van Cuong proposed keeping the current 7-step tax schedule, because the progressive tax increase according to this schedule is more regular and reasonable.

“The taxable income up to 10 million VND is 5%; over 10 - 20 million VND is 10%; over 20 - 40 million VND is 15%; over 40 - 60 million VND is 20%; over 60 - 80 million VND is 25%; over 80 - 100 million VND is 30%; over 150 million VND is 35%,” Mr. Cuong proposed.

Consider personal income tax rates for business households

Commenting on this content, delegate Tran Hoang Ngan (HCMC delegation) proposed that the Government consider taxing individual business households with revenue of 200 million VND or more.

“If the revenue is 200 million VND a year and the expenses are deducted, how much income is left? Meanwhile, the deduction for personal tax is 15.5 million VND/month, which is up to 280 million VND a year. So this calculation is very low. Although it is said to be compatible with the Law on Value Added Tax, I suggest reviewing this clause. It should be regulated that the business household's revenue must be at least 300 million VND or more, or even 400 million VND or more, to be subject to personal income tax for individual business people, to ensure compatibility with people with current income who are subject to tax deductions,” delegate Tran Hoang Ngan suggested.

Delegate Hoang Van Cuong (Hanoi delegation) also gave his opinion on regulations on personal income tax for business individuals.

According to the draft, individuals with production and business activities with annual revenue of 200 million VND or less do not have to pay personal income tax. Personal income tax on business income of resident individuals with annual revenue from 200 million VND to 3 billion VND is determined by multiplying revenue by tax rate (from 0.5 - 5%).

According to Mr. Cuong, it is unfair to set a threshold of 200 million VND in revenue for a business household to start calculating tax. According to the Hanoi delegation, instead of basing on revenue, tax should be based on income.

Previously, according to the audit report of the Economic and Financial Committee, the regulation on the revenue level of business individuals not subject to personal income tax (from 200 million VND/year or less) has revealed many shortcomings.

Chairman of the Economic and Financial Committee Phan Van Mai said that the current threshold for non-taxable revenue is too low compared to business practices, and at the same time does not ensure fairness compared to salaried workers - the group that is currently subject to a certain family deduction.

Therefore, it is recommended that the drafting agency calculate and adjust the tax-free revenue level of individual business owners to be more equal and consistent with the family deduction level.

PHAM DUY

Source: https://vtcnews.vn/bieu-thue-5-bac-co-the-khien-nguoi-lao-dong-mat-dong-luc-tang-thu-nhap-ar985398.html