Does there need to be a support policy on personal income tax?

An individual has an income greater than VND17 million/month and VND22 million/month, the payable tax is also very low compared to the individual's income. Photo: Thùy Linh

Tax rate is still quite low

According to current provisions of the Law on Personal Income Tax, individuals are entitled to deductions from social insurance, health insurance, unemployment insurance, family allowances, charitable donations, humanitarian aid, deductible allowances and benefits (if any). The rest is the basis for calculating personal income tax (PIT).

According to the Ministry of Finance, on June 2, 2020, the Standing Committee of the National Assembly approved Resolution No. 954/2020/UBTVQH14 on adjusting the family allowance of personal income tax and applying from the tax period of 2020.

Accordingly, the adjustment to raise the deduction for family circumstances of PIT would contribute to reducing tax obligations for taxpayers. The payable tax amount would be reduced for all who are paying personal income tax from salaries and wages. With the adjustment to increase the deduction for the taxpayer from VND9 million to VND11 million/month and for each dependent from VND3.6 million to VND4.4 million/month, the person earning income from salary and wages of VND17 million/month (if there is one dependent) or VND22 million/month (if there are two dependents) are not subject to PIT.

In the case that an individual has an income greater than the above levels (VND17 million/month, VND22 million/month), the payable tax is also very low compared to the individual's income.

For example, in the case of an individual with one dependent, if a person has a salary of VND17 million/month, excluding social insurance, health insurance, unemployment insurance, then this person does not have to pay PIT. If the income is VND18 million, they only pay VND35,000/month. In case there are other allowances or subsidies that are deducted before tax calculation, the payable tax amount will be even lower (or not payable).

As for the case of an individual has two dependents, if this person has a salary or salary of VND22 million/month and subtracting social insurance, health insurance, unemployment insurance this person is not subject to PIT.

If the income is from VND23 million/month, after paying compulsory insurance and family allowance, this person only pay personal income tax that is VND39,500/month (the tax amount is very small, accounting for only about 0.17% of the total personal income).

If the income is VND30 million/month, the level of payable tax at level 1 (VND5 million x 5%) is VND250,000, level 2 [(7.07 - 5) x 10%] rounded to VND210,000. Total payable tax is VND460,000/month. In case there are other allowances or subsidies that are deducted before tax calculation, the payable tax amount will be even lower. The income after tax is the income that is spent: VND30 million - paying PIT (VND460,000) = VND29,540,000.

It is not necessary to have a support policy for individuals with good income

In fact, the Covid-19 pandemic in 2020 and 2021 caused people to have a significant impact on their income. However, for individuals who are employees affected by Covid-19, if they lose their jobs, have no income or have an income that is not enough to pay tax, they will not have to pay tax. Besides that, unexpected hardship allowances, severance allowances, job loss allowances are also not included in the taxable income of individuals.

For those who have difficulty due to the pandemic, the state budget has offered a lot of support such as subsidies; tax exemption and reduction policies for individuals operating businessed. With tax obligations, when income is reduced and has not reached the taxable threshold, of course, it is not required to pay into the state budget.

From another angle, according to many experts, with the current new family allowance, even if affected by the pandemic, an income of VND 7 million or more is still considered a good level.

"When the state budget is facing many difficulties, every policy to support people and businesses (especially those related to taxes and fees) is carefully considered by the State. Therefore, people who have good income and are subject to PIT (although it is not much according to calculation) do not need to apply State's tax support policies. We should concentrate the support for people who experienced more difficult situations or more practical policies to revive production for people and businesses," an expert said.