The progressive tax schedule for salaried employees currently consists of 7 levels, with tax rates ranging from 5% to 35%. However, the thick tax schedule and the concentration right at the first income steps is a problem that experts have repeatedly suggested to the management agency to amend.
In the latest draft of the Personal Income Tax Law (replacement), the Ministry of Finance proposed two options to amend this tax schedule, in the direction of reducing the number of levels and widening the income gap.
In both options, the minimum tax rate of 5% corresponds to taxable income in the month of VND 10 million (after deducting family circumstances and other taxable expenses). The maximum tax rate is 35%, for taxable income over VND 80 million (option 1) and VND 100 million or more (option 2).
According to the Ministry of Finance, narrowing the number of tax brackets will simplify tax management and collection, facilitate tax declaration and tax reform trends in the world . Implementing both options will meet the goal of reducing brackets and adjusting taxable income at each bracket.
Proposed tax rate adjustment by the Ministry of Finance:
| Tax level | Current | Option 1 | Option 2 | |||
| Taxable income (million VND/month) | Tax rate (%) | Taxable income (million VND/month) | Tax rate (%) | Taxable income (million VND/month) | Tax rate (%) | |
| 1 | to 5 | 5 | to 10 | 5 | to 10 | 5 |
| 2 | >5-10 | 10 | >10-30 | 15 | >10-30 | 15 |
| 3 | >10-18 | 15 | >30-50 | 25 | >30-60 | 25 |
| 4 | >18-32 | 20 | >50-80 | 30 | >60-100 | 30 |
| 5 | >32-52 | 25 | over 80 | 35 | over 100 | 35 |
| 6 | >52-80 | 30 | ||||
| 7 | over 80 | 35 |
However, according to the Ministry of Finance, the impact of the two options is different. Option 1 reduces tax for income over 10 million VND, option 2 reduces more for income over 50 million VND.
For example, with option 1, an individual with a taxable income of 10 million VND per month will receive a reduction of 250,000 VND. Similarly, an income of 30 million VND will receive a reduction of 850,000 VND, an income of 40 million VND will receive a reduction of 750,000 VND, and over 80 million VND will receive about 650,000 VND...
The Ministry of Finance said that applying personal income tax with progressive rates is a common policy in the world. Currently, all countries apply multi-step progressive tax schedules, but the methods and design methods of each country are different. The general trend applied by some countries recently is to simplify the tax schedule by reducing the number of progressive rates.
Regarding tax rates, the highest applicable rate in some countries has been adjusted upward. For example, last year, Finland increased its highest tax rate from 57% to 57.3%, Lithuania from 20% to 32%... Some Asian countries have a 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, such as Singapore with 13 tax brackets. 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 (2 brackets).
VnExpressSource: https://baohaiphongplus.vn/hai-phuong-an-thay-bieu-thue-thu-nhap-ca-nhan-416894.html
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