Important roles of personal income tax policy

the implementation of the PIT policy plays a very important role in implementing the redistribution policy. Source: Internet

Proposing to the Ministry of Finance, voters of Ca Mau province said that the Law on Personal Income Tax has been amended and supplemented in Law No. 26/2012/QH13 dated November 22, 2012 and Law No. 71/2014/ QH13 dated November 26, 2014.

However, due to the increasingly progressive socio-economic development conditions as people's incomes have improved, daily living expenses have increased too. Therefore, the deduction for personal circumstances and the deduction for dependents following the Resolution No. 954/2020/NQ-UBTVQH15 dated June 2, 2020 of the National Assembly Standing Committee (the family deduction for taxpayers is VND 11 million/month and deduction for each dependent is VND 4.4 million/month) is not suitable in the current situation.

Voters propose amending and supplementing the Law on Personal Income Tax by increasing the deduction for family circumstances and deduction for dependents, and increasing the starting level for calculating the partial progressive tax.

Responding to this issue, the Ministry of Finance said that, according to the provisions of the current Law on Personal Income Tax (PIT), individuals are entitled to deductions from social and health insurance, unemployment insurance, professional liability insurance for some jobs must participate in compulsory insurance, minus the family deduction, charitable and humanitarian contributions, and allowances as prescribed. The remaining amount is the income used as the basis for PIT calculation.

On June 2, 2020, the National Assembly Standing Committee approved Resolution No. 954/2020/UBTVQH14 on adjusting the deduction for personal income tax. Accordingly, adjusting the deduction for taxpayers from VND 9 million/month to VND 11 million/month, for each dependent is from VND 3.6 million /month to VND4.4 million/month and applies right from the tax year 2020.

The adjustment to raise the rate of deduction for personal income tax has contributed to reducing the obligation for taxpayers, and the amount of tax payable is reduced for all subjects who are paying PIT. With the current deduction for the taxpayer is VND 11 million/month and for each dependent is VND 4.4 million/month, the person earning income from salary and wages at VND 17 million/month (if there is 1 dependent) or VND 22 million/month (if there are 2 dependents) after deducting social insurance, health insurance, unemployment insurance, etc., taxpayers have not yet paid personal income tax.

“The regulations on deduction before tax calculation ensures the principle that individuals need to have a certain income to meet the essential needs of life, such as; food, accommodation, travel, study, medical examination and treatment, so if the incomes earning above this threshold, they must pay tax. The application of deductions is also aimed at excluding low-income subjects from paying PIT.”

The level of family deduction for taxpayers and taxpayers' dependents, according to the provisions of the law on PIT, is a specific level following the general level of society and cannot be specified for individual cases. The current family allowance is still guaranteed to be higher than the per capita income and the regional minimum wage or the national average standard of living.

“If individuals have difficulties due to natural disasters, fires, accidents, or fatal diseases, the Law on PIT has regulations on tax reduction for these cases. Personal income tax is regulated on individual's income", the Ministry of Finance affirmed.

Moreover, according to the Ministry of Finance, the implementation of the PIT policy plays a very important role in implementing the redistribution policy.

Currently, through performing the tasks assigned by the Prime Minister in Decision No. 2114/QD-TTg dated December 16, 2021, promulgating the Plan on implementing the Conclusion No. 19 KL/TW of the Politburo and the Orientation Project of the law promulgation programme for the 15th National Assembly, the Ministry of Finance is reviewing and evaluating tax laws including the Law on Personal Income Tax, in order to report to the Government and to the Standing Committee of National Assembly for consideration to amend and supplement under the Programme on promulgating legal documents and ordinances of the National Assembly, ensuring conformity with Vietnam's socio-economic conditions, as well as international practices.