In the latest draft of the Law on Personal Income Tax (amended), the Ministry of Finance submitted to the Government a minimum tax rate of 5% corresponding to taxable income in a month of 10 million VND (after deducting family circumstances and other taxable expenses). The progressive tax rate is reduced to 5 levels, but the maximum tax rate is still 35%, applied to taxable income over 100 million VND.
Proposed tax rate adjustment by the Ministry of Finance:
| Tax rates | Current | Plan submitted to the Government | ||
| Taxable income (million VND/month) | Tax rate (%) | Taxable income (million VND/month) | Tax rate (%) | |
| 1 | to 5 | 5 | to 10 | 5 |
| 2 | > 5-10 | 10 | > 10-30 | 15 |
| 3 | > 10-18 | 15 | > 30-60 | 25 |
| 4 | > 18-32 | 20 | > 60-100 | 30 |
| 5 | > 32-52 | 25 | over 100 | 35 |
| 6 | > 52-80 | 30 | ||
| 7 | over 80 | 35 |
Explaining, the Ministry of Finance cited international experience showing that some countries still maintain the highest tax rate of 35% (Thailand, Indonesia, Philippines), even 45% (China, Korea, Japan, India). According to this Ministry, adjusting the tax rate along with increasing the family deduction level, adding other deductions (health, education ) will reduce the tax adjustment level - the tax payment rate on total income.
However, many opinions say that this tax rate is no longer reasonable and should be lowered. According to a representative of Deloitte Vietnam Tax Consulting Co., Ltd., Vietnam's current progressive tax rate is among the highest in Southeast Asia. Specifically, the maximum tax rate of 35% is currently equal to that of Thailand and the Philippines, while Singapore only applies the highest rate of 24%, Malaysia and Myanmar are 30%.
Deloitte proposed that the Ministry of Finance adjust the tax schedule and increase the taxable income threshold at all levels, especially at the highest level, to match the economic growth rate and attract high-quality human resources.
In more specific analysis , Ms. Nguyen Thuy Duong, Director, Head of Personal Income Tax Consulting Department of KPMG Vietnam, said that many countries in the region such as Thailand, Malaysia, Indonesia or the Philippines currently only apply tax rates of 24-30% for the same income level of 80 million VND or more.
KPMG representative also analyzed the ratio of taxable income to GDP per capita, showing that at the proposed 5-25% levels, Vietnam divides income ranges quite similarly to Indonesia and Thailand, ensuring progressivity and appropriate tax bearing capacity.
However, at the 35% level, Vietnam proposes to apply 10 times GDP per capita, much lower than Thailand (20 times) and especially Indonesia (62 times). According to Ms. Duong, this makes the middle and high income groups pay the maximum tax early, while these countries only apply it to the very high income group.
According to a survey conducted by VnExpress from August to now, about 73% of nearly 12,700 participants chose the highest personal income tax rate of 20-25%. Only 5% agreed to pay the highest tax rate of 35%, while 7% chose the maximum rate of 30%.
KPMG experts believe that adjusting the highest tax rate from 35% to 30% will be more economically reasonable, closer to international practices, and create a competitive advantage in attracting high-quality human resources. This view is also agreed by the Ho Chi Minh City Tax Consultants and Tax Agents Association. Meanwhile, the Vietnam Automobile Manufacturers Association recommends keeping only 4 tax rates (5%, 10%, 20% and 30%), instead of maintaining the 35% rate as in the draft.
In addition to attracting and retaining talent, tax experts also believe that attractive tax policies are a key factor in foreign enterprises' investment decisions, while also creating incentives for legitimate enrichment and limiting tax evasion and transfer pricing.
The maximum rate should be 25%, which is also agreed upon by many opinions. The National Assembly delegation of Nghe An province believes that this rate will encourage and motivate taxpayers better. According to Associate Professor, Dr. Phan Huu Nghi, Deputy Director of the Institute of Banking and Finance (National Economics University), this rate will be more suitable to actual income and ensure fairness and efficiency in tax regulation.
Mr. Nghi reiterated the view that the highest tax rate should only be 25% because Vietnam has a low average income, the economy needs to accumulate and invest. In addition, the policy also needs to motivate workers, while the corporate income tax is at 20%.
"In the future, when per capita income reaches a high threshold, Vietnam can increase personal income tax rates," he stated his opinion.
In fact, Vietnam's GDP per capita has increased continuously in recent years, reaching 4,700 USD last year. Vietnam is aiming for high growth of 8% or more this year and double digits in the coming period to join the group of high-income countries by 2045.
Prof. Dr. Vu Minh Khuong, Lee Kuan Yew School of Public Policy, National University of Singapore, estimates that if Vietnam's GDP per capita increases by 6.5% continuously for 20 years, by 2045, this index will reach 15,000 USD - the lowest threshold in the high-income group. If this speed is maintained, Vietnam can reach an average income per capita of about 20,000 USD by 2050.
Personal income tax is the third largest source of revenue in the tax system, after value added tax (VAT) and corporate income tax. Last year, total state budget revenue exceeded VND2 quadrillion for the first time. Of this, personal income tax is estimated at VND189 trillion, up 20% over the previous year. The proportion of this tax type accounts for more than 9.3% of total state budget revenue, up from 5.3% in 2011.
Associate Professor Dr. Phan Huu Nghi believes that the progressive tax schedule ensures vertical equity, but if not properly designed, it will destroy labor motivation, especially in the context of rapidly increasing average income.
"Income increases by 30% but if the margin is not widened and the tax rate is not adjusted accordingly, workers will suffer the loss," he said. According to experts, this affects the mentality of dedication and transparency in tax declaration in the long term.
If the operator still maintains the high tax rate of 35%, experts say the tax threshold should be raised. Mr. Nguyen Van Duoc, Director of Trong Tin Accounting and Tax Consulting Company, said this option could help offset the shortfall in tax revenue from lower-level taxpayers, but the income threshold should be raised to 120-150 million VND and increased gradually, compared to the proposed 100 million VND.
Agreeing with this view, Ms. Duong said that if the highest tax rate is kept at 35%, Vietnam should consider setting this threshold at a minimum of 20 times GDP per capita (equivalent to 2.4 billion VND per year, according to GDP per capita in 2024) instead of the current level of 10 times. This option is equivalent to raising the tax threshold of the highest level to 120 million VND per month.
PV - VNNSource: https://baohaiphong.vn/muc-thue-thu-nhap-35-cua-viet-nam-thuoc-nhom-cao-trong-khu-vuc-521198.html
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