Clause 2, Article 22 of the Law on Personal Income Tax stipulates a progressive tax schedule applicable to income from salaries and wages with 7 tax rates: 5%, 10%, 15%, 20%, 25%, 30% and 35%.
In the draft Personal Income Tax Law (replacement) that is being consulted by the Ministry of Finance , the Ministry proposes two options to amend the tax schedule, in the direction of reducing the number of tax rates and widening the gap between taxable income thresholds.
Two specific options are as follows:
In both options, the number of tax rates in the tax table is reduced from 7 to 5 and the highest tax rate is 35%.
According to the Ministry of Finance, narrowing the number of tax brackets will contribute to simplifying tax management and collection, facilitating tax declaration and calculation, and conforming to the trend of personal income tax reform in the world .
Both options achieve the goal of reducing the number of tax brackets and adjusting taxable income thresholds to even numbers. However, the impact of each option on taxpayers is different.
For option 1, individuals with taxable income at level 1 will not be affected. However, due to the adjustment of the family deduction level, this group will still receive a tax reduction. Individuals paying tax at level 2 or higher will receive a larger tax reduction than at present.
For example, an individual with a taxable income of 10 million/month will receive a reduction of 250,000 VND/month; an individual with a taxable income of 30 million/month will receive a reduction of 850,000 VND/month; an individual with a taxable income of 40 million/month will receive a reduction of 750,000 VND/month, an individual with a taxable income of 80 million/month will receive a reduction of 650,000 VND/month...
For option 2, basically every individual with taxable income of 50 million VND/month or less will have their tax reduced equivalent to option 1. For individuals with taxable income of over 50 million VND/month, the reduction will be greater, so the state budget revenue will decrease more than option 1.
According to the Ministry of Finance, the application of personal income tax by the progressive method is a common trend in the world. Countries all apply a multi-step progressive tax schedule, but the methods and design are different. The general trend that some countries have recently applied is to simplify the tax schedule by reducing the number of steps in the tax schedule.
Regarding tax rates, the highest applicable rate in some countries is adjusted to increase. For example, in 2024, Finland will increase the highest tax rate from 57% to 57.3%, Lithuania from 20% to 32%... Some Asian countries have the highest tax rate of 45% including Japan, Korea, China, or 30% (Malaysia) and 35% (Philippines, Indonesia).
Regarding the number of tax brackets, countries also design differently, for example, Singapore has the most tax brackets, 13. Countries in Europe, North America and Australia mostly apply 5-6 tax brackets. The US alone has 7 tax brackets, while Albania is the country with the fewest, only 2.
Source: https://baolaocai.vn/bieu-thue-thu-nhap-ca-nhan-rut-tu-7-xuong-5-bac-thue-suat-cao-nhat-35-post649396.html
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