Personal income tax of up to 35% on income exceeding 100 million VND is too high.

The Ministry of Finance has proposed reducing the number of levels in the personal income tax table from 7 to 5, with the highest tax rate remaining at 35%. However, experts have proposed removing the 35% tax rate.

5 tax brackets to simplify the tax system

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), the Ministry of Finance proposed two options to amend the progressive personal income tax schedule in part by reducing the number of levels and widening the gap between taxable income thresholds.

In both options, the minimum tax rate of 5% corresponds to a monthly taxable income of VND10 million (after deducting family circumstances and other taxable expenses). The maximum tax rate is 35%, for taxable income of over VND80 million (option 1) and VND100 million or more (option 2).

The Ministry of Finance proposed two options to amend the tax schedule. Screenshot

Sharing with VietNamNet reporter, Ms. Le Thi Thuy, CEO of Bach Khoa Consulting Services Company Limited, said that the application of 7 current tax rates with the gap between taxable income thresholds is too thick, only a difference of 5 million VND has caused a jump in tax rates.

Therefore, the Law on Personal Income Tax (replacement) is seeking opinions. The Ministry of Finance has proposed two options to amend the tax schedule in the direction of reducing it to only 5 tax brackets, which shows that the drafting agency has listened to the comments.

Although both options have 5 tax brackets, with the highest tax rate of 35%, Ms. Thuy is inclined towards option 2 because this option is more reasonable and has better tax brackets than option 1.

“Some countries have the highest tax rate at 35% like Vietnam, some countries even higher, however, when calculating personal income tax, people are entitled to many deductions, like in the US, some living expenses are deductible, but in Vietnam, the deductions are less,” said Ms. Thuy.

Analyzing the two options for amending the tax schedule proposed by the Ministry of Finance, Mr. Nguyen Van Duoc, Head of the Policy Department of the Ho Chi Minh City Tax Consultants and Agents Association, General Director of Trong Tin Accounting and Tax Consulting Company Limited, expressed his support for shortening the tax schedule to 5 levels, because this will make the tax system simpler and more convenient.

However, Mr. Duoc is inclined towards option 2, because this option has a slower jump for levels 2 and 3 and the tax threshold of 30% starting from 100 million VND will be more suitable to reality.

Proposal to remove 35% tax rate

Notably, Mr. Duoc suggested considering removing the 35% tax rate. “My personal opinion is that the 35% tax rate should be removed. Currently, taxpayers tend to think that taxes are too high, leading to them losing their will to get rich and their motivation to strive,” Mr. Duoc said.

Experts suggest considering removing the 35% tax rate. Photo: Nam Khanh

According to him, maintaining too high a tax rate not only does not encourage development but also creates negative consequences such as fraud and tax evasion.

“If we reduce the tax rate to only 30%, it will encourage people to get rich transparently, while limiting negative behaviors. Moreover, in the context of globalization, this will also create a more competitive labor environment, help attract and retain high-quality human resources, and limit the ‘bleeding’ of income abroad,” the expert emphasized.

Besides that, Mr. Duoc proposed a stronger reform plan for levels 1 and 2.

“If possible, we need to expand levels 1 and 2. For example, we can apply a 5% tax rate to income up to 20 million VND. Then, from 20 million to 40 million VND, we will be taxed at 15%, meaning we skip level 10%. Then, redesign levels 3, 4 and 5 in the most scientific way,” Mr. Duoc suggested.

According to him, restructuring low tax brackets not only helps reduce the burden on the majority but also reflects the true spirit of personal income tax.

“The goal of personal income tax is to collect from high-income earners for redistribution. Reducing the burden on lower levels, although it may reduce revenue, will be offset by better transparency and compliance at higher levels. This will both support workers and make tax policy more equitable and effective,” said Mr. Duoc.

Source: https://vietnamnet.vn/danh-thue-thu-nhap-ca-nhan-len-den-35-voi-phan-vuot-100-trieu-dong-la-qua-cao-2426070.html