This decision should have actually been made two years ago in 2020, when the consumer price index (CPI) had then risen to 22% compared to when the law came into force. Indeed, the law stipulates that when the CPI exceeds 20%, it must be adjusted.
Tax rates are not reasonable
It is believed that the proposed amendment and adjustment of the personal income tax law is too slow because the Ministry of Finance tries to make its own adjustments even when the regulations and tax calculations no longer match to the reality on the ground. Because when the value of money decreases due to inflation, tax brackets and family deductions also decrease accordingly, making the lives of employees and dependents increasingly difficult. Even in the difficult years of the Covid-19 pandemic, employee incomes declined, but the PIT still increased steadily. It was only in the first quarter of this year that the amount of IRP was estimated at 43.3% of the target plan, up to 20.6%.
The law on personal income tax currently has two major shortcomings which need to be amended soon, namely that the method of calculating the progressive tax in seven steps is too cumbersome and that the regulations on the levels of deduction family is not realistic. According to the provisions of the current IRP law, individuals are entitled to deductions for social insurance, health insurance, unemployment, family deduction, charity, humanitarian contributions and allowances, the rest being consisting of income used as the basis for the calculation of the IRP.
The question is how to calculate PIT according to the seven-step progressive scale when each level of income has a corresponding tax rate. Specifically, first, the income level of VND 5 million per month or less is subject to the tax rate of 5%; second, for VND 5 million to VND 10 million, the tax rate is 10%; third, for the level of 10 million VND to 18 million VND, the tax rate is 15%; fourth, for the level of 18 million VND to 32 million VND, the tax rate is 20%; fifth, for the level of 32 million VND to 52 million VND, the tax rate is 25%; sixth, from VND 52 million to VND 80 million, the tax rate is 30%; and seventh, from VND 80 million per month or more, the tax rate is 35%.
Many people believe that the provisions of the seven-tier progressive IRP and the gap between tax levels are too narrow and tax rates are high, resulting in a heavy burden on taxpayers because income just increased and fell into a higher level of taxation. Therefore, the revised personal income tax law is expected to reduce the tax level to three to five steps and lower the tax rate of the steps, because the current high tax rate is not fair. Specifically, with the application of a tax rate of 35% for income of VND 80 million per month or more, it can only target the group of employees and not be able to cover all others. high-income groups in the country, such as commerce, securities and real estate with uncontrollable income.
Realistic family deduction
According to the Association. Teacher. Dr. Ngo Tri Long, former deputy director of the Price Market Research Institute of the Ministry of Finance, it is not appropriate to take the CPI as a measure to adjust the IRP calculation rate and reduce family circumstances. Currently, CPI statistics do not fully reflect the increase in prices of essential goods and services in daily life that people have to pay.
According to the regulations, when the CPI increases by 20%, it will be submitted to the Standing Committee of the National Assembly for review and adjustment. Thus, in the past, the adjustment of deductions for employees has not been timely, which has disadvantaged taxpayers.
In fact, inflation in Vietnam usually only increases by about 3-4% per year, and if the CPI is cumulative to reach a 20% increase, it will take about five years to adjust the family deduction. Meanwhile, the annual increase in the CPI has an impact on the income and lives of taxpayers. Therefore, the adjustment of the family deduction should not be based only on the CPI, but also on the growth of people’s income, because the PPI is currently applied to high-income people, not to low-income people. intermediate.
According to the Association. Teacher. Dr. Ngo Tri Long, the family deduction in the current personal income tax law is not close to the reality on the ground, revealing obvious shortcomings. Specifically, from July 2020, the Personal Income Tax Law stipulates that the family status deduction for taxpayers will be adjusted from VND 9 million to VND 11 million per month, and for each dependent, from VND 3.6 million to VND 4.4 million. million per month. This is an outdated deduction as the economy grows steadily and the prices of goods and services rise, forcing taxpayers to spend a lot of money to cover their basic daily expenses.
Currently, for people with an income of 13 million VND to 18 million VND per month but with one or two dependents, this amount was only enough to cover their life almost ten years ago, calculated from the time of adjustment and complement of the People Income Tax Act in 2012. This amount is mainly spent on essential daily items such as food, fuel, electricity, water, education , etc. These expenses always have a higher rate of increase than the inflation figure every year, because the CPI calculated basket of goods with 11 groups of goods and services, while many non-essential things have reduced their prices, such as the post and telecommunications, beverages, tobacco, clothing, hats and shoes.
In addition, according to current regulations, the deduction for family circumstances is a common fixed rate for all taxpayers in different regions, when the level of living expenses has a significant difference but is not reasonable. At the same time, the personal income tax law also does not allow employees to deduct expenses such as medical examination and treatment costs, as well as health care costs incurred by employees. health insurance does not cover.
Therefore, the revised personal income tax law should supplement expenditure regulations with bills and documents, such as children’s school fees, interest on loans to buy the first home, insurance premiums, electricity and water bills, and must be deducted when calculating the PIT. At the same time, the deduction for family circumstances should also be increased from 11 million VND to 17 million VND or 20 million VND per month. Along with this, the level for dependents is to be raised from 4.4 million VND to 6.5 million VND or 7.5 million VND per month.