Personal income tax becomes a burden.

Rising food prices are driving up the cost of essential necessities.

The calculation method is illogical.

Ms. Bui Thi Kim Phuong, residing in Ngoc Chau ward ( Hai Duong city), has just completed her 2023 tax settlement. She works at a revenue-generating public service unit, and her income has been consistently declining by 8-10% annually over the past few years. Compared to 2019, before the Covid-19 pandemic, Ms. Phuong's total income in 2023 decreased by nearly 30%.

Although her income decreased, the amount of personal income tax she had to pay increased because of occasional income that was subject to a 10% tax deduction. While income decreased, expenses such as her two children's education and household living costs increased. "My eldest child's tuition for a full-time public university program is already 4.2 million VND per month, so the dependent deduction of only 4.4 million VND per month is too low; it's not enough to cover even the most basic needs like food, housing, transportation, and education," Ms. Phuong explained.

Mr. Nguyen Van N., Director of an accounting services company, analyzed: It is unreasonable that the personal income tax rate for salaried employees is as high as 35%, higher than the corporate income tax (only 20%). While manufacturing businesses can deduct all travel expenses and expenses for purchasing work tools, and only calculate the 20% tax after making a profit, employees, regardless of their income, are only allowed to deduct 11 million VND/month, which is insufficient to cover basic living expenses. Expenses such as rent, car purchases, clothing, and bank interest are not included in the deductions for salaried employees. “Salary employees only need to earn over 80 million VND/month to pay 35% tax. Meanwhile, someone who wins a multi-million dollar lottery prize without any effort only pays 10% tax,” Mr. N. further explained.

According to Ms. Nguyen Thi Phuong, a tax accounting service provider in Tu Ky town, the current practice of applying a single, uniform personal allowance while the government sets minimum wages across four regions is an inconsistency in calculating personal income tax.

Paradox that needs to be resolved

How to calculate personal income tax

In recent years, despite some new difficulties arising in people's lives, personal income tax revenue in Hai Duong province has continued to increase. Specifically, according to aggregated data from the Hai Duong Provincial Tax Department, in 2021, the province collected over 980 billion VND in personal income tax, while in 2022 it collected nearly 1,052.5 billion VND, an increase of nearly 7.4%, and in 2023 it collected nearly 1,112 billion VND, an increase of nearly 6%. Personal income tax regularly accounts for 8-10% of total domestic tax revenue, usually only lower than budget revenue from foreign-invested enterprises, non-state enterprises , and land use fees.

In the first quarter of 2024 alone, personal income tax revenue in Hai Duong province reached over 440 billion VND, achieving 43% of the annual target and increasing by 14% compared to the same period last year.

According to Ms. Huynh Thi Quynh Thuong, Chief Accountant of a business in the Lai Vu Industrial Park (Kim Thanh), the personal income tax revenue in recent years has been largely contributed by salaried employees. However, the frozen real estate market has led to a decrease in personal income tax revenue from real estate transfers.

The Personal Income Tax Law was enacted on November 21, 2007, and came into effect on January 1, 2009. After more than 15 years of implementation, many limitations and shortcomings of this tax remain unresolved despite numerous amendments and additions. The effectiveness of a tax must ensure criteria such as simplicity, ease of implementation, low compliance costs, and fairness.

The personal income tax system has seven progressively increasing brackets, but the different rates make calculation and implementation very difficult. Specifically, after deducting family allowances, the tax is calculated at 5% for each additional 5 million VND; 10% for the next 5 million VND; 15% for the next 8 million VND; 20% for the next 14 million VND; 25% for the next 20 million VND; 30% for the next 28 million VND; and finally, 35% for income exceeding 80 million VND per month.

Despite several revisions aimed at increasing it, the personal allowance is still considered low and outdated compared to the actual cost of living.

With the current regulations on personal deductions, low-income salaried workers who receive additional bonuses or commissions that are subject to a 10% provisional tax are required to file a final tax return at the end of the year to receive a tax refund.

According to Ms. Nguyen Thi Viet Nga, Deputy Head of the Standing Delegation of the National Assembly of Hai Duong province, in reality, the prices of many essential goods and services have increased sharply recently, making life more difficult for salaried workers. Meanwhile, the personal allowance deduction has been slow to change and update. This leads to disadvantages for those paying personal income tax… It is expected that from July 1st, Vietnam will implement salary policy reforms for officials and civil servants, as well as propose increases in the regional minimum wage and pensions. If salary adjustments are implemented in parallel with amendments to personal income tax, it will ensure the interconnectedness of policies. The deduction for taxpayers and dependents must be comprehensively reassessed and adjusted immediately in the spirit of nurturing revenue sources. "Instead of focusing on the easily collectible group of salaried employees, tax authorities need more tools and resources to exploit new revenue sources such as e-commerce and cross-border services... If there is a breakthrough policy, these new revenue sources could compensate for the loss of personal income tax when the family allowance deduction is increased," Ms. Nga suggested.

TRANG LAM

Source: https://baohaiduong.vn/thue-thu-nhap-ca-nhan-thanh-ganh-nang-379916.html