Proposal to raise personal income tax from wages and salaries

	Noticing when finalizing PIT on income from salaries or wages
	Hanoi has another place to receive documents for personal income tax finalization
	Increasing electronic tax declaration and reducing tax finalization at Tax agencies

New method to calculate personal income tax is be more realistic, simple, easier and more convenient to taxpayers. Photo TL.

Under the provisions of Clause 2 of Article 22 of the Law on Personal Income Tax, the partially progressive tariff includes 7 tax bands with taxation rates from 5% to 35%. Actually, many people reflected that the current partially progressive tariff is unreasonable, leading to many obstacles. There are too many tax grades, and for low level incomes, the tax grade thresholds are too low, making it easy to leap up a grade, which results in a higher level of payable tax. This raises the sum total income tax payable at the end of year and unnecessarily increases the amount of tax settlement, while the additional tax payable is not much. Moreover, the taxable income at each grade is calculated by the odd number, making it difficult to remember and self-determine the tax payable for taxpayers.

In the implementation of the Tax Reform Strategy for the period 2011-2020, the Ministry of Finance proposed the Government to approve the amendment to the partially progressive tariff in the direction of reducing the number of tax grades to 5, and adjusting the taxable income in each grade by the even number.

In the draft report, the Ministry of Finance has proposed to amend and supplement the Law on Personal Income Tax for method of tax calculation for wage and salary.

According to the first method: the new tariff shall have 5 grades. Under this new tariff, individuals who currently have taxable income at grade 1 will not be affected. Individuals who currently pay taxes at level 2 or above will receive a tax reduction. However, the tax rate increased from 10% to 15% at grade 2, from 20% to 25% at grade 3, from 28% to 30%; and to 35% at grade 5.

According to the Ministry of Finance, despite meeting the target of reducing the number of tax grades and adjusting taxable income at each grade to an even number, this method will fall by VND 1,300 billion (impact on revenue of 2015).

At the same time, it was said that the new tariff would benefit high-income individuals but not low-income individuals. Specifically, individuals who are paying taxes at grade 1 will not benefit, and individuals who are paying taxes from grade 2 or higher will be entitled to a tax reduction. For example, individuals with a taxable income of VND 10 million per month will receive a reduction of VND 250,000 per month, individuals with a taxable income of VND 30 million per month will receive a reduction of VND 850,000 per month, individuals with VND 40 million per month will be reduced by VND 750,000 per month and individuals with taxable income of VND 80 million will receive a reduction of VND 650,000 per month.

According to method 2, the Ministry of Finance proposed that grade 1 with VND 5 million will correspond to a tax rate of 5%; grade 2, from VND 5 million to VND10 million will pay a tax rate of 10%; grade 3 from 10% to 40% will apply a tax rate of 20%; grade 4 from VND 40 million to VND 80 million will apply the tax rate of 30% and grade 5 with above VND 80 million will apply a tax rate of 35%.

As analysed by the Ministry of Finance, with this method, individuals who currently have income at grade 1 and level 2 will not be affected; individuals with income at grade 3 and higher must pay an increase of tax rate compared to the current rate, but this increase is not too much for high-income individuals.

For example: individuals with taxable income of VND 15 million per month will pay VND 250,000 more per month; Individuals with a taxable income of VND 30 million per month will pay more VND 400,000 per month; individuals with a taxable income of VND 50 million VND per month will pay VND 500,000 more per month and individuals with a taxable income of VND 80 million per month will pay VND 650,000 more per month.

Personal income tax for health insurance VCN – Health insurance that employers buy for employees would not count towards employees personal income tax.

With this method, the total budget revenue is estimated to increase about VND 500 billion. The Ministry of Finance prefers this method which is shown in Clause 8 of Article 4 of the draft Law.