Snags in controlling income tax

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VOV News English - 82 month(s) ago 12 readings

Snags in controlling income tax

(VOV) - The evaluation and definition of a “marker” to tax personal income is purely based on fixed pay while taxing real income earners remains uncontrollable.

The Ministry of Finance (MoF) has proposed to the Government a tax exemption scheme for income earners of up to VND5 million/month. Accordingly, only income earners of up to VND5 million/month enjoy tax exemption while those with higher incomes of up to 10 million/month or more will not be subject to any tax relief or reduction.

A Voice of Vietnam (VOV) reporter interviewed the Vice Chairman of the National Assembly (NA) Committee for Economic Affairs, Le Quoc Dung, about the issue.

Reporter: What is your comment on the MoF’s proposal for amendments to the Law on Personal Income Tax?

Mr Dung: Prices have kept rising over the years since the Law on Personal Income Tax was promulgated more than two years ago. Under this law, the initial level of tax payment is applicable to income earners of VND4 million. However, under the MoF’s proposal to increase the initial level of tax payment by 25 percent to those of VND4-5 million and above is considered unacceptable to the rates of inflation (e.g 19 percent in 2008, 7 percent in 2009 and 11.75 percent in 2010). If 2007 was a marker for tax payment with the initial tax payment level of VND4 million, the tax payment level only rose 25 but inflation has kept running away over the past three years, currently at a rate of 10 percent. For this reason, the tax payment level of VND5 million is not practical in the face of soaring prices in the market.

Reporter: What we should do if the law is revised? Is it possible to tax personal income based on the payroll as we are doing, not at a fixed level of VND 4-5 million as the MoF proposed?

Mr Dung: It is very difficult to define exactly how much people earn. In fact, many people are on low pay but they earn high incomes from different sources. So, it is really difficult for the State to control the tax payment through its outdated and irrational salary system.

Reporter: Do you think it is necessary to revise the Law while improving the taxation and other measures to control personal income sources more effectively?

Mr Dung: It is essential to have a proper mechanism for controlling personal income source, even through bank accounts, credit cards or the IT system. All activities related to the incomes of State employees and workers must be put under control.

The crux of the matter is that we need to build a synchronous system of policies and revise related codes to define fixed pay and real income levels in a scientific way. If not, functional agencies will only take into account high income earners as tax payers.

Reporter: Thank you very much.

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