The Ministry of Finance plans to submit new regulations on income tax to the Government in the second quarter of this year, in which the number of people required to pay individual income tax might be expanded to include earners with monthly incomes of less than VND5 million (US$315), local media reported.
The threshold level of earnings that trigger the income tax has remained controversial, and many financial experts believe the current level of VND5 million per month, or an annual income of VND60 million, is still high and needs to be lowered.
The country currently applies income tax only to high earners: more than VND5 million per month for Vietnamese and VND8 million per month for foreigners.
Financial Minister Nguyen Sinh Hung said that, due to the impact of the tax on society, his ministry would have to conduct careful scrutiny before submitting a proposal to the National Assembly later this year.
To provide time for the public to become familiar with the tax regime, Hung said, the individual income tax would take effect in early 2009, a full one or two years after it is approved by the National Assembly, most likely next year.
Hung said, when the draft law is passed, the ministry would select roughly 200,000 to 250,000 high-income earners to tax on a trial basis before applying the law universally.
Accordingly, the current ordinance subjects some high-income earners, like singers and models, to taxation.
However, after a year of implementation, only 30 to 40 per cent of high-income earners were paying the tax while the rest were still escaping payment due to loopholes in the country’s financial management.
In addition, the Ministry of Finance has indicated, that the income tax law has many shortcomings.
For instance, the current income tax on high earners does not distinguish whether the taxpayer is single or married and supporting a family.
The regulations also fail to distinguish sources of income or allow deduction of legitimate business expenses like insurance.
According to financial experts, the country now needs to reform the financial management system, including restriction on cash payments and issuance of tax codes to each taxpayer in order to make individual income taxes a main source of State budget revenue, as it is in many other countries.
VNS
Vietnamese
