Personal income tax: '35% is too high'

According to the current Personal Income Tax Law, the progressive tax schedule applies to income from salaries and wages with 7 tax rates, including: 5%, 10%, 15%, 20%, 25%, 30% and 35%.

Many experts believe that the tax threshold in the progressive tax schedule should be adjusted according to inflation to ensure the lives of taxpayers. PHOTO: DAN THANH

In the draft Personal Income Tax Law (replacement) that is soliciting opinions, the Ministry of Finance proposed two options to amend the progressive tax schedule, reducing it from 7 levels to 5 levels.

Both options maintain the starting tax rate of 5% for taxable income up to VND10 million/month. The highest tax rate is still 35%, option 1 is applied to taxable income from over VND80 million/month (remaining the same as the current tax schedule - PV), option 2 is applied to taxable income from over VND100 million/month.

Talking to Thanh Nien, tax expert Nguyen Ngoc Tu ( Hanoi University of Business and Technology) worried that for many years now, employees and salaried workers have been "burdened with taxes". This group is considered to be the "hairy" group, and taxes are being delayed, causing a huge burden. The highest tax rate of 35% is also too high.

"Since the Personal Income Tax Law was enacted, CPI and GDP per capita have increased many times, why is the tax schedule still the same?", Mr. Tu asked, saying that the proposal to amend the tax schedule proposed by the Ministry of Finance is "not good enough".

"With such heavy taxes, how can we attract talented people to work, unleash resources, and create high-quality human resources? We must design a tax schedule so that the average tax rate for employees and wage earners is around 20%, which is okay," said Mr. Tu.

The expert proposed a 5-tier tax schedule with the following tax rates:

"Such a design is suitable for practice and ensures long-term application," Mr. Tu emphasized.

Tax threshold needs to be adjusted according to inflation

Agreeing with the reduction of the tax rate from 7 levels to 5 levels, Mr. Phan Huu Nghi, Deputy Director of the Institute of Banking and Finance (National Economics University), also said that the 2 options proposed by the Ministry of Finance are not reasonable.

The options proposed by the Ministry of Finance have eliminated the 10% and 20% tax rates - which are two important levels in the progressive system - but kept the highest tax rate at 35%. This would create too large a tax gradient between the middle and high levels.

"The progressive tax schedule needs to comply with the principle of a certain spacing coefficient, while at the same time creating motivation for high-income earners to work. The highest tax rate should be adjusted to 25%," said Mr. Nghi.

Regarding the detailed tax schedule, Mr. Nghi proposed as follows:

Associate Professor, Dr. Nguyen Huu Huan (Ho Chi Minh City University of Economics) analyzed that according to the revised options proposed by the Ministry of Finance, taxable income of less than 1 billion VND/year is subject to a tax rate of up to 35%, which is too high, reducing the motivation to earn money.

"Such an income level at present is only considered good, not rich. It is necessary to consider redesigning the tax schedule to be similar to the level of inflation since the Personal Income Tax Law was enacted until now.

The personal income tax table is outdated and has only been revised for more than ten years. This time, we should consider a mechanism to adjust the tax threshold in the progressive tax table according to inflation. For example, if the annual inflation rate increases by how much, we can adjust accordingly, without having to wait a long time to amend the law," Mr. Huan said./.

In the period of 2020 - 2023, the annual personal income tax revenue at levels 1 and 2 (tax rates of 5% and 10%) is about 3,000 billion VND to more than 4,000 billion VND, accounting for about 6%.

Annual personal income tax revenue at level 3 (tax rate of 15%) ranges from over VND 4,000 billion to over VND 6,000 billion, accounting for about 7%.

Personal income tax revenue at levels 4, 5, 6 (tax rates 20%, 25%, 30%) annually ranges from nearly 6,000 billion VND to nearly 9,000 billion VND, accounting for about 10%.

Personal income tax revenue at level 7 (individuals pay tax at the high rate of 35%) is the highest compared to other levels. In 2021 and 2022, each year is more than 40,000 billion VND; in 2020 and 2023, each year is nearly 40,000 billion VND, accounting for over 50% of the total personal income tax of the 7 levels.

According to Thanh Nien Newspaper

Source: https://thanhnien.vn/thue-thu-nhap-ca-nhan-muc-35-la-qua-cao-185250726165314823.htm

Source: https://baolongan.vn/thue-thu-nhap-ca-nhan-muc-35-la-qua-cao-a199563.html