The lack of "art" in personal income tax collection.

(NLĐO) - Taxing personal income is not just about collecting the tax "immediately," but also requires skill in design, communication, and implementation.

Citizens conduct transactions at the Ho Chi Minh City Tax Office.

The recent proposal in the draft Personal Income Tax Law (replacement) regarding real estate transactions is an example, demonstrating the lack of "the art of taxation".

Tax rates require consensus.

Instead of simply announcing the proposed tax rate and letting people interpret it however they want, the drafting agency could propose a very low initial tax rate, clearly explaining its impact on different groups, how vulnerable groups will be supported, and how the tax will be redistributed, etc., through press conferences to build consensus within the community.

Only when people understand, believe in, and accept tax policies will they have a chance to become effective tools for regulating and redistributing resources in society.

One of the most important factors affecting the economic efficiency of personal income tax is the marginal tax rate, which is the tax rate applied to additional income. When marginal tax rates are too high, a large portion of additional income is taxed, reducing the benefits that workers receive from extra work. As a consequence, individuals may choose to retire instead of working, or not invest in their careers, causing harm not only to themselves but also to the economy.

For example, someone earning 50 million VND/month could increase their salary to 60 million VND/month with additional income. However, if this extra income is taxed at 30%, the actual benefit received is significantly reduced and no longer attractive. In the long term, this could decrease the supply of high-quality labor and the overall labor productivity of society.

When individuals perceive that future income increases will be subject to high taxes, they may refrain from pursuing careers requiring specialized skills or shift to less taxable professions. As a result, the economy loses a portion of its high-quality workforce.

There are three common ways to avoid personal income tax.

Another issue associated with personal income tax is tax avoidance – a common reaction from individuals when faced with high tax rates.

When the tax structure becomes too burdensome, individuals may seek to convert income into tax-free forms such as gifts, benefits outside of salary, or underreport their income. In some cases, they even switch to working in the informal sector to avoid tax arrears.

These practices not only cause losses to the state budget but also undermine fairness and trust in the tax system.

All of the above impacts show that, to ensure economic efficiency, personal income tax policy needs to be designed so that the marginal tax rate is not too high, especially for the upper-middle income group – the group with the potential to create significant value for the economy.

Furthermore, the number of tax brackets should be sufficient to differentiate income groups to ensure fairness, but not so many as to complicate calculations and declarations. The spacing between tax brackets should be designed reasonably, avoiding excessively wide gaps that would cause people with different incomes to fall under the same tax rate.

If properly formulated, the new Personal Income Tax Law will not only help the State mobilize revenue sustainably, but also contribute to creating a healthy environment for work, investment, and learning, helping the economy develop efficiently, balanced, and in depth.

(Recorded by Thy Thơ)

Source: https://nld.com.vn/thieu-vang-nghe-thuat-danh-thue-thu-nhap-ca-nhan-196250725120506713.htm