Personal income tax should be exempted for a certain period of time for startups.

Doctor of Economics Nguyen Van Hien, Vice Principal of Gia Dinh University.

- In the draft Law on Personal Income Tax (replacement), the Ministry of Finance proposed to increase the family deduction level according to two options: Option 1, for taxpayers it is 13.3 million VND/month, for each dependent it is 5.3 million VND/month. Option 2, for taxpayers it is 15.5 million VND/month and for each dependent it is 6.2 million VND/month. What is your assessment of this proposal?

- Firstly, it must be affirmed that the proposal to increase the new family deduction level is very necessary because the current deduction level is no longer suitable. Specifically, increasing the deduction level will help reduce financial pressure for people, especially wage earners.

Second, regarding the deduction options, option 1 is based on the increase in the consumer price index (CPI), while option 2 is based on the GDP growth index per capita in the period 2020-2025. In general, people will lean towards option 2 because they will have to pay less income tax. However, option 1 should be applied because it has a more scientific basis because the increase in the consumer price index has reduced people's real income, increasing the deduction level according to CPI is essentially just compensating for the nominal income lost when the CPI increases. In addition, applying option 1 also helps ensure the financial safety of the national budget. When the state budget revenue is better, the economic situation and people's income increase, then option 2 should be implemented.

- Many opinions suggest that the deduction for dependents should be increased to at least 60% of the deduction for individual taxpayers instead of the 40% rate proposed by the Ministry of Finance. What is your opinion?

Taxpayers transact at Tax Base 4 of Hanoi city. *Photo: Nguyen Quang*

- This opinion is very correct and reasonable. According to current regulations, the family deduction for dependents is only 40% of the deduction for taxpayers. In the family, dependents are often the elderly and children, those who are unable to work, but the spending for these subjects is not small. In particular, the spending for children in big cities is even more than taxpayers with enough expenses such as milk, clothes, illness, etc. Therefore, the deduction for dependents is only 40% of the deduction for individual taxpayers is unreasonable, it should be adjusted to at least 60% of the deduction for taxpayers.

- The draft has added provisions allowing deductions for some expenses such as healthcare, education and training. Do you think we should consider expanding expenses such as rent or home loan interest to be deductible when calculating personal income tax?

- In big cities, the need to own a house for workers is essential and legitimate. However, with current income, buying a house is not easy. Many people have to rent or borrow money to buy a house. Currently, workers who rent a house also spend about 4-6 million VND/month, office workers who rent a house for their whole family have to pay 10-12 million VND/month. If they borrow from the bank to buy a house, they have to pay interest for many years and the monthly interest payment is at least 5-10 million VND/month. These are big financial burdens that workers and salaried employees find difficult to reduce, but are currently not tax deductible, causing difficulties in life.

In fact, many countries in the world have implemented the deduction of house rent and home loan interest when calculating personal income tax. For example, in Singapore and some other countries in the region, people who buy houses sold by the State under the category of social housing, the interest on the house loan is deducted from personal income tax. I think that we should consider adding the cost of house rent and home loan interest to be deducted when calculating personal income tax to ensure social fairness.

- In addition, do you have any other proposals to add to the Draft Law on Personal Income Tax (replacement)?

- There are some items that need to be considered, specifically start-up and innovation activities that are being encouraged by the State. Starting a business is not easy, to be successful, sometimes you have to start a business 2-3 times. However, "many people know about success, no one knows about failure", after a difficult time, having just started a business successfully, having income and having to pay taxes will cause difficulties for the subject. Therefore, personal income tax should be exempted for individuals who start a business and innovate for a certain period of time, about 3-5 years from when they have income.

Along with that, tax incentives are needed to retain talent and avoid brain drain. Specifically, for highly qualified human resources that need to be attracted from abroad to work in Vietnam or to attract talents to stay in Vietnam and not go abroad to live and work, personal income tax incentives are needed to motivate them to contribute. This issue needs to be specifically studied to avoid policy abuse.

In addition, in order to encourage people to invest in buying bonds, especially government bonds, the personal income tax policy needs to give incentives to individuals investing in this field. In my opinion, for those who buy government bonds, there should be a complete exemption from income tax, and for those who buy corporate bonds, it should be considered to reduce personal income tax by 50% compared to other types of income, including income when the bond matures or income arising from bond trading in the secondary market.

Thank you very much!

Source: https://hanoimoi.vn/nen-mien-thue-thu-nhap-ca-nhan-trong-thoi-gian-nhat-dinh-voi-nguoi-khoi-nghiep-712832.html